Dominic Coyle answers your personal finance questions

Transfer of shares and tax

I own some shares, which I would like to transfer, as a gift, to my daughter who is married and living in the UK.

Is there any cheap or simple way of transferring shares - e.g. by a simple deed - which would be accepted by the company registrar?

P.L., Dublin

There is a way of transferring shares to another person, such as a family member, without going through the rigmarole and cost of dealing with brokers. However, this still will not get around the issues both of capital gains tax and gift tax.

Going about transferring the shares from your name to that of your daughter is simple and does not require a stockbroker. You simply get a form from the Dublin Stamping Office at Dublin Castle, fill it in and return it.

While avoiding brokers' fees, you will still face stamp duty, which is currently levied at 1 per cent of the value of the transaction.

When the shares are transferred, you will have to assess any capital gain you have made on those shares up to that point. Obviously, any subsequent capital gain would be an issue for your daughter.

The fact that you are transferring the shares at no cost does not interest the capital gains section of the Revenue - although it will certainly interest the gift/inheritance tax section of whichever jurisdiction your daughter's tax affairs come under.

Getting back to capital gains, you will be able to offset any costs involved in the acquisition and disposal of the shares from any capital gain.

You will also be entitled to use the Revenue multiplier to update the purchase cost of the shares.

The multiplier, which no longer operates on inflation losses from 2003, was laid down by Revenue each year and can still be used for the period from the share purchase to the end of last year.

On the gift tax side, the relevant tax is probably British inheritance tax. Under this, the gift will not be taxable if you survive its granting by seven years. There are also provisions ruling out gifts worth around £3,000 sterling (€4,275) in any one year from the tax.

Residential SSIA rules

Some time ago, you replied to a query about whether an SSIA could be maintained while the account holder was working abroad for a period of time. Could you tell me when that was as I am anxious to sort out the rules?

Mr D.Q., Dublin.

I can't remember offhand when it was but it is no harm to run through it quickly again.

The basic rule is that you must be resident in the State to maintain a special savings incentive account (SSIA).

However, there is some leeway for those going abroad for a period of time. Essentially, if you go abroad in a given tax year, say November 2003, you would be entitled to continue paying into an SSIA for three further tax years - until the end of 2006 in our example.

The key element is the concept of ordinary residence. If you have been resident in the Republic for tax purposes for three years, you become ordinarily resident at the start of the next tax year.

Once you are ordinarily resident, you remain so for three full tax years after you leave the jurisdiction.

The quid pro quo is that you must pay tax to the Irish Revenue on all your worldwide income apart from a token €3,000 a year and, more importantly, also excluding any income earned abroad for work carried out wholly abroad.

First Active shares

Thanks for all the information on First Active shares and their capital gains implications.

However, I have two issues regarding them that have not been covered.

If shares are held in two names (husband and wife), is the capital gains allowance doubled?

I purchased 747 First Active shares at the launch date (September 1998) for €2.86. In March 1999, I did a B&B on 660 of them and upgraded them to €4.93.

What dates do I assign to the two free shares for each of the 660 shares - September 1998 or March 1999 and what is the cost assigned to the 660 - €2.86 or €4.93?

Mr P.J.C., email

Okay, we have been over most of the possible First Active ground by now but, as you say, there always seem to be some new issues cropping up.

The rule on shares held by joint parties - husband and wife or any other dual ownership for that matter - is that each party can utilise their own capital gains tax exemption.

In effect, this doubles the allowance while staying within the Revenue rules that state the capital gains allowances cannot be transferred between parties.

On the question of shares that have been bed & breakfasted, the relevant price is the new purchase price.

The whole point of the B&B exercise is to lock in capital gains to maximise one's allowance in a given year while not concluding the transaction with fewer shares than one had at the outset.

So, when you sold the shares in March 1999 for an effective gain of just over €2 a share, those shares were gone. You then bought 660 new shares at €4.93 to retain the size of your holding.

As a result, the bonus shares attaching to these 660 shares will date back to March 1999 and an assumed purchase price of one-third of €4.93 - or €1.64.

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.