Stockbroker fees' reliefI have a query regarding the tax treatment of stockbroker fees. My stockbroker charges a minimum annual management fee of €1,000 plus some other charges, to which VAT at 21 per cent is added. These fees are a substantial proportion of my investment income.

As a necessary expense incurred in the earning of this investment income, I think it should be possible to offset this expense against investment income for tax purposes. One problem is that investment income is a combination of dividend income and capital gains. In fact, in recent years, it is more correctly described as a combination of dividend income, more than offset by capital losses. Can you explain what tax relief, if any, is available in respect of such stockbroker fees? Mr J.F., Dublin

I can see the argument - why not treat stockbrokers' fees in the same way that you can offset accountants' fees against income tax? Unfortunately, there is no provision in the tax code to support it. In fact, the code is very specific on the issue. An individual is only entitled to make deductions against income in relation to expenses incurred in the carrying out of their trade or profession. There are also specific provisions for the claiming of expenses against rental income.

However, such a definition would not include expenses incurred on income garnered through investment - be it dividend income or any other.

As it happens, you may not even be entitled to claim all these expenses against capital gains, when a gain does materialise.

PricewaterhouseCoopers tax partner Mr Jim McDonald reminds me that fees incurred in the acquisition or disposal of an asset are allowed only against capital gains on that or other assets. Such fees include charges made by stockbrokers, estate agents, lawyers, surveyors and others who advise in the purchase of any asset. However, such allowable expenses relate only to the acquisition or disposal of the asset. There is no provision to claim management fees.

Credit card stamp duty

With regard to your piece recently in relation to credit card stamp duty, I have three cards with MBNA. When I tried to cancel one of them early last year saying I didn't use it much and citing the stamp duty as a reason, MBNA told me it would put my account in credit as its interpretation of the tax was that it was a tax on debit balances. Since then I have put all three accounts into credit for April 1st this year and last year and have paid no duty on any of the cards.

Mr C.D., e-mail

Well, I wouldn't spend all the money you think you have saved at once because as soon as the Revenue contacts MBNA, you will owe €120 in stamp duty for the three cards for the year to April 1st, 2003, and a further 120 for the current year.

MBNA seems to have made a fundamental error in its interpretation of the legislation regarding credit cards and stamp duty. The fact is that each credit card account is liable to stamp duty at 40 per account.

The duty is per account so if you have several cards working off the one account, you will only be liable to pay one set of stamp duty. However, your situation seems to involve one card on each of three separate accounts and that leaves you open to three separate bills for stamp duty.

The Revenue did grant some leeway to credit card holders whose accounts were open during the period but were inactive for the entire year in question, but that is not fixed in the legislation as far as I understand.

The issue about outstanding debts relates to card accounts that have been closed by the accountholder or the bank but which still have money owing on them. Despite being closed, they are liable to the duty because there is still a debit.

There is no provision for active accountholders to avoid paying the duty simply by having their accounts in credit on a particular date, and if you incurred further debts in doing so - overdraft charges, for instance - you might have a case against your card provider for the refund of these. It is the responsibility of the card provider to collect this on behalf of the Revenue, which means that MBNA should be debiting the accounts and paying over the relevant sums to the State.

The fact that your provider got it wrong does not absolve it from paying the right sum and MBNA is likely to be faced with the choice of billing those customers, such as yourself, to whom it appears to have given incorrect advice or taking the rap itself and paying out of its reserves on those customers' behalf.

You would certainly have an argument for insisting that MBNA pay any duty due by you from the date you sought to cancel one of your three cards and were advised that this was not necessary. After all, but for this advice, you would not have incurred further liabilities. As a matter of financial husbandry, why are you running three cards if you can do without them upon the arrival of a stamp duty bill?

Financial priorities

I am 62 years old and retiring this month. I have a State pension, no home mortgage, no bank loans and children reared. I will get a gratuity of about 70,000. I have a rental property with a mortgage of 100,000 which qualifies for tax relief. I have an insurance policy maturing shortly at 25,000. I am wondering whether I should clear the mortgage and have an extra income from the rent. I am conscious of the very poor deposit interest rates. I would welcome your opinion.

Mr M.McM., Limerick

As a general rule, one should clear one's debts before worrying about investments - although products such as the Special Savings Incentive Scheme illustrate why this is not always the case. It is also true that, as you get older, you become more restricted financially in two ways. First, your earning capacity diminishes, if it doesn't end completely.

Secondly, because you have less time and wherewithal to recover from investment hiccups or bad investment choices, a reasonable financial adviser will direct your savings into lower-risk products which, by their nature, have less potential return.

In your case, you acknowledge you will have a limited State income and some rental income - at least pending the maturity of your insurance policy. As it stands, the return you are likely to receive on your lump sum is unlikely to match the amount you are paying on the mortgage on your investment property, despite current low rates. As such, I would suggest you pay off the mortgage and use the rental income to augment your pension.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.