Q&A: DOMINIC COYLEanswers your personal finance questions
Q AM I correct that a shareholder in a publicly quoted bank (like Anglo etc) which is 100 per cent nationalised can treat this for CGT as an enforced sale at zero value to the shareholder and claim a CGT loss of the purchase price less zero sale price in annual CGT calculations?
Second question, if it is a part-nationalised situation, like in RBS, what is the CGT treatment?
Mr PM, Dublin
A In general, if a company is nationalised, then the shares held by investors are worthless and, as you say, would be treated as having a nil value for the purposes of capital gains tax.
However, this is not quite the case in Anglo Irish Bank – at least not yet.
When Minister for Finance Brian Lenihan announced the nationalisation of Anglo last month, he said an “assessor” would be appointed to decide the value of Anglo shares.
He did caution that Anglo might ultimately be judged to be worthless, in which case shareholders would get nothing.
If, however, the assessor decides, having looked at the underlying value of the bank’s assets, that they held some value, the Minister will establish a compensation scheme within a month of receiving the assessor’s report.
There is provision to appeal any assessment made by the assessor to the Irish Financial Services Appeals Tribunal but any successful appeal would need to establish “as a matter of probability” that there was a “serious error” in the determination.
A judicial review to the High Court will only be granted if it is a “substantial issue” and the application is made within one month of the assessor’s report to the Minister (or longer if there is a substantial reason why the application was not made within one month).
The situation is not necessarily as clear-cut when it comes to situations like Royal Bank of Scotland (RBS) where the UK government has taken a significant shareholding.
The bank has not split the shares but simply diluted the holdings of existing investors.
That dilution is reflected in the share price.
While RBS traded above 50p sterling at the turn of the year and at 34.7p just ahead of the UK government move, its shares were valued at just 11.7p by the market in the immediate aftermath of the part-nationalisation.
This market markdown will be reflected in any capital gains tax calculation you will need to make should you dispose of the shares.
Of course, the way things are going for RBS, the prospect of full nationalisation still looms.
Q In your column last week you state that the 1 per cent levy applies to all income; however, I understood that very low incomes up to €18,000 approximately are exempted.
Ms E.H., e-mail
A Apologies for any confusion. People holding a full medical card (not just a GP-only medical card) are exempt from the levy. So, too, is anyone with an annual income of less than €18,304. This figure rises to €20,000 for people over the age of 65. However, if your income is above the level – even slightly – all income is liable to the levy.
However, when calculating your income, you should discount any social welfare payments. These are also specifically exempt.
Thus, if you have income of more than €18,304 but the figure falls below that when you exclude any social welfare payment, you will be exempt.
Q In your column last week, you assured your reader W.P. Dublin, that he will not be subject to the 2 per cent Health Levy despite losing his “over-70” medical card. I am in the same position as “W.P.” but was informed by a Revenue official (on the phone who said he was positive) that the health levy exemption was linked to possession of a full medical card. Perhaps you would be good enough to clarify the matter for me.
Mr J.M., Dublin
A The Revenue official is wrong. According to the Department of Health, which is responsible for the levy: “The [Health] Bill [2008] provides that all persons aged 70 and over will be exempt from the Health Contribution (the ‘Health Levy’), no matter what their income is or whether they have a medical card or not.”
This information is contained in a document issued by the Department last December entitled: Questions and Answers: Health Bill 2008, Medical Cards for People Aged 70 and over.
Q I currently have my savings in an Irish financial institution that is part of the Government guarantee scheme. Where do I stand if the country goes broke. Do I lose all my money? Would I be better of moving it to say Northern Rock?
Mr A.S., Dublin
A If the country goes broke, the guarantee will be worthless. Should you move to Northern Rock? Your choice. Then you’re betting on the UK government not going broke.
Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2 or by e-mail to dcoyle@irishtimes.com. 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 questions. All suitable queries will be answered through the columns of the newspaper.
No personal correspondence will be entered into.
