Money: Windfall eyes on Ireland
READERS' LIVES: Irish building societies ... a TSB windfall? ... capita l gains tax on a house. Your financial queries answered
Sunday 02 November 1997
Failing a carpetbagging trip to Dublin here are telephone numbers for the societies' head offices in Eire: EBS ('the Educational'), 00 353 1 677 5599; Irish Nationwide, 00 353 1 609 6000; Norwich Irish, 00 353 1 671 7220.
Each society should be able to send you application forms to open accounts. Make it clear that you want details of accounts that carry membership - so-called "share" accounts - and don't be surprised if staff try to fob you off with an account that doesn't carry membership rights that would be much less likely to qualify for any windfall. It is still possible to open a share account with First National (00 353 1 283 1801), Eire's biggest society, which recently announced plans to convert, but you are highly unlikely to build up the two years' membership Irish societies require for customers to qualify for any windfalls.
Regarding the astounding amounts of unclaimed windfalls from this year's rash of building society demutualisations (700,000 people due windfalls worth pounds 1bn, according to this newspaper), I have just found old passbooks for TSB accounts opened for my children by their grandparents 20 years ago. Are they owed windfalls for when the TSB (the old Trustee Savings Bank) floated in the 1980s? BH, Durham
Sorry, no. The fact that the accounts were opened for children makes no difference, nor the time that has passed, nor the balances (pounds 70 and pounds 220). There were no building society-style windfalls for customers from the TSB flotation, nor indeed from the TSB's recent "merger" with Lloyds Bank. It was ruled that TSB was not a mutual but belonged to the state, so in that sense its original flotation was more like a privatisation. Customers and staff were given priority in the share offer, but no "free" shares.
My brother and I each owned a 50 per cent share in a home we bought for our mother. She has now gone into a nursing home and the property has been sold. How much capital gains tax will we have to pay? GB, Kent
You bought the property in March 1989. Take the purchase price and add on all costs incurred (including solicitors' fees, stamp duty and survey costs). In this case the total cost came to just pounds 16,734 (that is, a cheap house). There's no tax on this amount when you sell.
Now, let's assume you sold the property on 15 April 1997 (you don't give the exact date of sale). Follow this procedure:
q Step one. Look up the retail prices index. The RPI was 112.3 in the month of purchase and 156.3 in the month of sale. Take 112.3 from 156.3 to get 44. Divide 44 by 112.3 and multiply by 100 to get 39.18. So inflation over the period of your owning the property was 39.18 per cent.
q Step two. Take 39.18 per cent of your purchase costs of pounds 16,734, which is pounds 6,556. This is your tax-free indexation allowance. Add this figure to your purchase costs to get a tax-free pounds 23,290.
q Step three. Work out the net proceeds from the sale after things such as the estate agent's fee and solicitors' costs. The net proceeds were pounds 59,595. Subtract from this the tax-free pounds 23,290 to get pounds 36,305. This is your "chargeable gain". Divide by two because there are two of you. You and your brother each have a chargeable gain of pounds 18,152.
There is no tax to pay on the first pounds 6,500 of chargeable gains each. Will you make any other chargeable gains this tax year? For example, have you sold any windfall shares? Let's assume neither of you will make any other chargeable gains in the current tax year that ends on 5 April 1998. In that case, each of you will make a "taxable gain" of pounds 18,152 less pounds 6,500, which equals pounds 11,652. pounds 11,652 is added to your taxable income and taxed at 20 per cent, 23 per cent or 40 per cent, depending on what tax band(s) it falls into. If it all falls within the 23 per cent tax band, for example, you will pay 23 per cent of pounds 11,652, which is pounds 2,679. Assuming the sale took place in this tax year (that is, between 6 April 1997 and 5 April 1998) you will have to include details on the tax return sent out next April.
Incidentally, did you make any improvements, as opposed to routine maintenance? Expenditure on improvements, along with the appropriate indexation allowance from the date of expenditure, can be deducted from the sale proceeds.
q Write to Steve Lodge, Personal Finance Editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a phone number, or fax 0171-293 2096 or e-mail s.lodge@ independent.co.uk. Do not enclose SAEs or any documents you wish returned. We cannot give personal replies or guarantee to answer every letter. We accept no legal responsibility for advice given.
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