Q&A Dominic Coyle

* This article has been amended

In 2005, a son was gifted an apartment, with a market value of €300,000.is father owed him €76,000 for shares arising out of the sale of a family business, which had been sold in 1997, leaving a net value on the gift of €224,000.

In 2005, the group threshold was €446,725, but the current one is €225,000. Even taking account of the small annual amount allowance, the gift exceeds 80 per cent, requiring completion of a Revenue return.

The son will have an inheritance some time in the future from the same source, or otherwise from the mother. What thresholds will apply and is there an implication of the debt to him of the shares?
Mr P.K., email

I’m slightly confused by the phrasing of the letter but I think the answer is fairly straightforward, if not necessarily what you might have hoped.

The father gifts the son an apartment with the €300,000 market value. However, as I understand it, €76,000 of that is in lieu of shares which the father owed the son from the sale of the family business.

As all this takes place back in 2005 when the capital gains tax category A threshold – governing gifts and inheritances passing from a parent to a child – stood at €446,725, there is no capital gains tax liable.

In fact, and this is what confuses me slightly, the gift – even if you were to include the full €300,000 valuation without offsetting the outstanding “loan” – would not be above the 80 per cent threshold at that time. Therefore, the requirement to file a return on the basis that the gift exceeds the 80 per cent threshold does not apply.

Moving forward to today. The threshold, as you note, has fallen sharply. At €225,000, the father’s gift would be well in excess of the threshold in 2013 terms. However, that is not relevant. A gift can only be assessed against the threshold in place in the year in which it is made. In this case, that is the 2005 threshold.

Where the new lower threshold is relevant for the son is in assessing liability to capital acquisitions tax (gift or inheritance tax) on any future gift or, as you note, any likely future inheritance. If the threshold is to remain at its current level, any gift or inheritance above the annual €3,000 exemption will be liable to CAT, currently at 33 per cent.

Essentially, while the Revenue cannot backtrack to tax on a previously concluded arrangement, the breaching of the current threshold counts for all future transactions.

Is it the case that you don’t have to pay Dirt after you reach 65? If so, how do I go about arranging it? Do I still have to pay tax on the interest or is it tax free?

Mr T.M., Dublin

It depends. Deposit Interest Retention Tax is deducted at source from all interest paid in Ireland on deposits in banks and credit unions.

To stop this happening, and have your interest paid gross, you need to fill out a DE1 declaration form for your bank certifying that you meet the necessary criteria.

For older people, there are two criteria that apply.

First, you or your spouse must be over the age of 65, and:

Second, your total income must fall below the income exemption limit. For a single person, the limit this year is €18,000 and for a couple, it is €36,000.

Your bank will certainly have copies of the necessary declaration form, or you can get it from the Revenue.

Why are Irish Life & Permanent shares not listed in either the Irish or British stock exchanges?
Mr A.R., Dublin

* The shares aren’t listed on the main Irish stock market and the company no longer exists in the form in which you originally acquired your shareholding. However, a successor company, Permanent TSB Group Holdings Ltd, is listed on Dublin’s “junior” ESM market.

Having said that, your shareholding is worth just a fraction of what it was originally, and not just becuase the price of the shares has fallen. You and other investors who initially owned 100 per cent of the company now own just 0.2 per cent.

What happened is that when the Government sanctioned the investment of billions of euro into Irish Life & Permanent to recapitalise its banking business, the State took a stake of 99.8 per cent of the company in return – leaving all the existing shareholders (around 135,000 of them) with 0.2 per cent of the company.

Then, Irish Life was sold, initially to the State but evenutally to Great West Lifeco, the owner of Canada Life. Permanent TSB Group Holdings is now the owner of Permanent TSB bank.

If you look in the paper under the ESM Closing Prices list, you will see that Permanent TSB was trading at four cent a share at the end of last week.

This column is a reader service and is not intended to replace professional advice. Please send your questions to Q&A, c/o Dominic Coyle, The Irish Times, 24-28 Tara St, D2, or to dcoyle@irishtimes.com