QA:Q I HAVE a large sum of money - in sterling - deposited in the Isle of Man branch of Anglo Irish Bank.

For several days now, I have been trying to discover whether the full amount of my deposit, which is well in excess of the £50,000 recently guaranteed by the Manx government, is completely covered by the Irish Government's promise to depositors in Irish banks.

As the Isle of Man is not part of the EU, there seems to be an anomaly.

After several unanswered e-mails, and being held in a phone queue on three occasions when I gave up waiting, I finally got through to a "real person" at the bank.

This lady assured me that 100 per cent of my savings were guaranteed and safe, and that the Irish Government would be making an announcement to this effect "within a day or two".

So far, I have not read or heard anything to this effect. Can you please enlighten me as to whether my deposit is covered - or not - by the Government's promise, because no one else seems able to.

P.S., California

A You are not alone. I have fielded more questions in the past fortnight on this issue than on any other element of the bank guarantee scheme.

The confusion arises because the Irish Government rather jumped the gun with the announcement of its State guarantee on bank deposits - much to the annoyance of other EU member states.

Britain was particularly annoyed because a number of Irish banks operate in Britain and a State guarantee that covered these would give them an unfair competitive advantage over British banks operating in their domestic market.

It is certainly the case that the original Irish Government announcement covered deposits at all branches of AIB, Bank of Ireland, Irish Life Permanent, Anglo Irish Bank, EBS Building Society and Irish Nationwide Building Society - regardless of where the branch was located. Clearly, under this interpretation, you are covered.

However, the EU quickly stepped in to state that the scheme would need to be amended to meet EU competition and State aid regulations.

As a result, the Government is still tinkering with the scheme, which has since been extended to a number of other "foreign" banks operating in Ireland.

As of yesterday, the position is that the Government cannot say exactly which overseas branches and subsidiaries of Irish banks will be covered until the banks complete and submit their applications for inclusion in the scheme.

However, the Department of Finance said yesterday that it is expected that the vast majority of Irish-owned foreign branches and subsidiaries will be covered. The guarantee to each financial institution will set out which branches and subsidiaries are going to be insured by the State.

Clarifying terms of financial guarantee

QIn the recent legislation that specifically secures deposit accounts at a number of our banks, where do we stand on policies taken out with these banks?

For example, I have policies with Ark Life (through AIB), Irish Life (via TSB) and an "Evergreen" (via Ulster Bank)?

You may suggest contacting the banks, but I don't think I'll get an "honest" answer.

Ms H.N., e-mail

I tend to be fairly hard on the banks and, in the light of recent events, that does not seem an unreasonable approach.

However, to be fair, I would not question the honesty of any answer you might get from any bank of which you are a customer - the more likely scenario is that frontline staff simply may not know the answer.

Often, in an attempt to reassure customers, staff may attempt to answer a question when they should simply say they don't know.

This issue is a case in point. There remains huge confusion over the exact parameters of the bank guarantee arrangements put in place by the Government - not least because the Government has been remarkably coy about setting down exactly how it will work, as you can see from other articles in today's supplement.

The guarantee is designed to cover bank deposits. There has never been a question of covering every product sold through our banks - such as life policies or investment funds.

Such items are not covered by the scheme.

Tax liability for share capitalisation

Q As of September 15th last, I am in receipt of 423 ordinary shares allotted through the capitalisation issue at Royal Bank of Scotland (RBS) on a one for 14 basis.

The letter from the bank said that, in relation to British-based personal beneficial shareholders, the capitalisation issue should not result in a charge for capital gains tax as the issue is regarded as a reorganisation.

The shares issued under the capitalisation programme and the original shares are taken together and treated as the same asset as the original shareholding - acquired at the time and price of the original shareholding.

Is the position the same in Ireland, ie that no income tax and capital gains tax is payable as a result of the capitalisation issue? Clearly any disposal will come under capital gains tax rules.

Mr R.B., Dublin

A This is a particularly technical area and I passed the question on to the office of the Revenue Commissioners. They tell me that the Capital Gains Tax Acts do contain special rules that relate to the reorganisation or reduction of a company's share capital.

This covers situations like the Royal Bank of Scotland capitalisation issue, where existing shareholders were allotted new shares in the company in proportion to their existing shareholding. In this case it is one share for every 40 shares held in the Scottish bank, which is the parent of Ulster Bank and First Active.

In general, the Revenue says, a reorganisation or reduction of share capital is not regarded as a disposal of the original shares or an acquisition of new shares.

Instead, the original shares and the new shares are treated as being the same asset as the original shareholding - both in terms of the cost and the data of the acquisition.

As you say, capital gains tax will only arise as an issue if and when you eventually sell any part of the holding.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2 or by 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 questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.