1 in 10 people are co-habiting in Ireland. Are you one of them?
Did you know that unless you are married or in a registered civil partnership, you have no automatic right to each other’s estates on death. Even if you can apply for provision from your deceased co habitant’s estate, you will still have to pay inheritance tax on it. Cohabiting couples are treated as strangers for Inheritance and Gift Tax purposes. The stranger threshold for inheritance tax is currently €15,075.
Example 1
John & Mary bought a house in joint names. They paid the deposit, mortgage repayments and joint mortgage protection equally. John dies in the first year of the mortgage, the proceeds of the mortgage protection policy pays off the house which is currently valued at €125,000. Mary inherits 50% of the property (assuming held as joint tenants) which is valued at €62,500.
The inheritance tax threshold for Mary in relation to this inheritance is €15,075.
€62,500 – €15,075 = €47,425
€47,425 x 33% (current inheritance tax rate) = €15,650.25 = Inheritance Tax
After 3 years family home relief may apply assuming all conditions are met.
Example 2
John takes out a life policy on his life for €200,000. He pays the premiums and he stipulates in his will that the proceeds of this policy are to be left to his co-habitant partner Mary. John dies.
The inheritance tax threshold for Mary in relation to this inheritance is €15,075.
€200,000 – €15,075 = €184,925
€184,925 x 33% (current inheritance tax rate) = €61,025.25 = Inheritance Tax
Example 3
John & Mary take out a dual life policy providing €150,000 of life cover and they pay their premiums from their joint bank account. Mary dies and €150,000 is paid to John as he is the surviving policy owner. Assuming John inherited no other assets and Revenue agrees that he paid 50% of the premiums he will have to pay inheritance tax on 50% of the benefit.
The inheritance tax threshold for John in relation to this inheritance is €15,075.
€75,000 – €15,075 = €59,925
€59,925 x 33% (current inheritance tax rate) = €19,775.25 = Inheritance Tax
There are solutions to these potential tax liabilities so if any of these situations are likely to apply to you please contact Paul or Rose for further information.
For those of you who are looking for a market beating rate on your pension, ARF and/or AMRF, we would highlight the latest offering from BCP Asset Management. They are currently offering 5% per annum on their High Yield Deposit Plan 7. The main features of this product are:
5% per annum and interest paid annually for 5 years
100% Capital Security
Term is 5 years and 1 month
Savings version also available
Closing date 30th May 2012
This really is an exceptional rate and is ideal for anyone who does not wish to take any chances with the performance of their pension investments for the next 5 years
Question
I bought a house in 2005 and lived in it from then onwards and have a mortgage with a local bank. Unfortunately I had to move oversees for work and left in December 2010. I have since rented the house out to a family in receipt of Social Welfare and they moved in January 2011. I am pretty sure I will have to file a tax return but how do I go about this and is there anything else I should be aware of?
• From January 2011 you became what is known as a ‘Non-Resident Landlord’ (NRL) and you are correct that you are required as such to file a tax return with the Revenue Commissioners and your first is due by the 31st October 2012 and every 31st October thereafter. There is an extra period available usually to mid-November if you wish to file electronically.
• As a NRL your tenant is required under tax legislation to withhold 20% of the rent and return this directly to the Revenue, however this is an area that the authorities are not overly stringent on provided the landlord returns the income details in their tax return.
• A Qualified Accountant will prepare Rental Income Accounts on your behalf from the information you provide. This will include the total rent received less any related expenditure including property insurance, general repairs, maintenance and upkeep of the property, collection fees, advertising, professional fees a proportion of the mortgage interest, and any others wholly, exclusively and necessarily in respect of letting the property. Note also that you must retain all invoices, receipts, payments records and bank statements.
• You should ensure that you are not receiving Tax Relief at Source or TRS in relation to the mortgage interest. This is only applicable to residents of their own mortgaged home and subject to a number of other conditions. As this is now a rental property TRS cannot apply. Your latest mortgage statement clearly states whether you are in receipt of this and if so you should contact Revenue’s TRS department and cancel it immediately. They simply need your PPS number and mortgage account number to do this.
• Capital allowances are available on all furniture; domestic equipment etc that you have provided to the tenants and you should prepare a list of these and their costs and again retain all invoices and receipts as proof of purchase.
• As a non resident you are no longer entitled to tax credits, however liability is dependant on the profit which is usually relatively low especially where there is qualifying mortgage interest relief. Your accountant will inform you of all costs before and get your approval before submitting the return.
Aside from the taxation implications there are a few other areas which will need attention:
• As a landlord you are required to register with the Private Residency Tenancy Board (PRTB). Failure to do so will mean that the mortgage interest will not be deductible against the income resulting in a higher profit and thus greater liability. The application may be back dated although there is a penalty for late registration and the forms and more information may be downloaded at http://www.prtb.ie.
• You are also required to register the property for the Non Principal Private Residence (NPPR) charge. As the property is no longer your ‘home’ it is liable for this charge which amounts to €200 per annum. You were first liable 31st March 2011 and payment due by 30th June. Unfortunately as the application is late there is a further €20 per month penalty for late payments. More information and online application and payment facility is available at http://www.nppr.ie and if you haven’t yet registered you should immediately do so. (www.moneyguideireland.com/category/nppr-ie provides useful information in relation to this)
• You may have the property insured through your mortgage lender or with an independent broker. Either way you should contact your insurer and inform them that the property is now rented as the current policy may not have adequate cover.
• The Household Charge is €100 per residential property situated in the State. The household charge is payable by the owner of the building in respect of each unit of residential accommodation. Where a building is divided into a number of flats or bedsits, the charge applies to each flat or bedsit. An online system – http://www.householdcharge.ie – is in place to enable home owners to pay the household charge by credit card/debit card. In addition, home owners can make the payment by cheque, postal order, etc. Owners of residential property on the liability date of 1st January 2012, subject to a limited number of exemptions and waivers set out below, are liable to pay the household charge by 31st March 2012. The charge can also be paid in four instalments of €25 by Direct Debit on 13th March, 14th May, 13th July and 10th September if you so wish.
Contact Paul or Shauna 074 9321222 for more information in relation to this or indeed any other matters financial or email paul@paulmcgonigle.com or simply log on to our website http://www.paulmcgonigle.com.
Opening Paul McGonigle Accounting & Financial Services is pleased to announce the official opening of their new office and presentation of their innovative website, http://www.paulmcgonigle.com/. The official opening of the office at 3 Ardaravan Square will take place on Saturday the 25th March 2012, from 3 pm to 5 pm. This will give both current and potential clients the chance to see the new state of the art offices, the launch of the website and gain further knowledge in relation to the services provided by the company.
Special Guests are the Senior Donegal Manager, Jim McGuinness, Buncrana’s GAA star Ryan Bradley and the Anglo Celt Cup will also be in attendance. Refreshments will be provided and the ribbon cutting ceremony will take place at 4.30 pm. A draw for vouchers for local businesses will also be held and a cheque presentation will be made to Buncrana Leisure Club. Paul McGonigle believes that this event will provide an opportunity for local businesses to come together and collaborate on issues that affect them.
New Offices The company is a modern, innovative, financial services business trading in its seventh year. As a result of a significant increase in clients through the years, Paul and the staff found that it was necessary to move to bigger premises in order to cater for their clients needs. Paul McGonigle feels that the new state of the art offices located at 3 Ardaravan Square, Buncrana, highlights their long term commitment to their clients. The new office incorporates three well-apportioned and stylish offices and one large meeting room, together with a welcoming reception area; scenic pictures from the locality are also displayed throughout the office.
Website Paul McGonigle is delighted to offer a new way of communicating the firm’s comprehensive range of services. Paul is quick to point out that the new launch is not just a cosmetic exercise, but an overhaul that offers a better way of explaining just what the firm can do for you. The website has been built from scratch and features in built videos of Paul summarising each of the services on offer. It’s both user friendly and jargon free and shows that with a bit of innovation, financial information can be presented with gusto. Besides the brand new website, the firm is also embracing social media with regular postings on Twitter, Facebook and a weekly blog since the start of the year.
Social Media Their Facebook page gives both handy tips as well as promoting local interest stories from the opening of a new business to a GAA story. The Twitter account is little bit more serious with links to web pages that offer useful up to date financial information. Paul also has a free weekly blog every Monday offering helpful information on topical matters – recent blogs have covered the pensions letters and the price of drink. The strap line for their social media campaign is ‘Money Matters 2012’ and Paul and the staff are keenly aware that in these difficult times, prudent advice on money is more important than ever.
Ireland is the only EU country that the Chinese Vice President, Mr. Xi Jinping, has attended on his current trade mission trip. Four agreements were signed over the weekend focusing on trade links, investment and education. The deals, aimed at making it easier for Irish companies to sell goods and services to China, present a bit of good news for once and the Tánaiste, Eamon Gilmore said China had identified Ireland as the country it wants to do business with. The two countries have much to offer each other in food and agriculture, in high technology research and in investment – and every effort should be made to realise that potential.
China’s growing middle class and increased wealth mean that more money is available to spend on food and drink, IT and pharmaceuticals, which Ireland can export. There have also been discussions on possible cooperation on alternative energy research.
The visit has dominated the news in China and hopefully will provide a much needed boost to our economy, Ireland currently hosts the most Chinese students per capita in the EU and we may receive more tourists who wish to try out hurling, to see if they can get on as well as Mr. Xi Jinping!
The Taoiseach has accepted an invitation for a visit to China next month to further strengthen relations and Mr Xi is anticipated to succeed president Hu Jintao, who must retire from the presidency in 2013.
Public Sector Workers Retiring Next Month
Have you thought what you will do with your tax free cash? Here are some options:
• Reduce/ pay down outstanding debt – mortgages/credit cards/ loans etc.
• Invest in Capital Guaranteed Products.
• Invest in Government Savings Bonds.
If you are interested in investing there are a variety of options available to you.
• Invest in a bank deposit within a life company: For example Irish Life are currently offering rates of 23.5% gross for a 5 year period on lump sum investments over €10,000 through Permanent TSB.
• Invest in a variety of fixed term bonds with Irish Government bonds and certificates. Their 5 year certificate pays 21% net after 5 ½ years. The growth on these investments is tax free.
• Invest in a variety of unit linked funds with life companies which depending on your attitude to risk, may provide higher returns than bank deposits. Minimum investment starts from €5,000.
• There is a variety of capital guaranteed investments available also. For example, BCP are currently offering a fixed rate of 4.5% gross for 5 years subject to a minimum investment of €25,000.
Before deciding to invest it is very important that you ask yourself how comfortable you would be if your investment lost some value especially in the short-term. Investing is usually for the medium to long-term (typically, 5-7 years or more) to give investments time to grow in value. However, even long-term investing involves risk as values will fluctuate over time and most investments do not provide a guaranteed level of return or a promise that you will not lose money.
As a general rule of thumb, the greater the potential return you want from your savings and investments, the greater the risk you have to take. It is important to talk to a financial advisor about the level of risk you are prepared to accept and what it will mean to the returns you can expect. This should then influence the type of funds that you invest in – funds that suit your appetite for investment risk.
Recently I had a night out with friends and family where a bottle of beer in a local bar cost €4 and the exact same bottle that day in a local supermarket cost €1. So what chance the pub? None.
There is much talk of late in respect of minimum pricing for supermarket off licence alcohol sales and this is of a particular interest of course to our publican and restaurant clients.
With the growth of large supermarket chains the result is a major change in the number of off licence facilities available. Furthermore these facilities are in a position to offer their product at a substantially reduced price than their traditional stand alone competitor. Indeed in many cases these supermarkets are selling beer, spirits and liqueurs at less than what they paid for them simply to entice customers into their premises. Even today’s supermarket radio advertisements have bottled beer as their final big price giveaway of the week as they “try to reduce the price of shopping”.
The effect of this is felt on the hospitality industry particularly in difficult economic circumstances as we all have less money and will find savings wherever possible.
So what happens fiscally if the Government increases the minimum price of alcohol sales in the supermarkets?
• The playing field will be evened in respect of the attractiveness of the pub, i.e. there will not be that much difference in price between going to the pub and buying off sales (or at least not that much to force closure of the pub).
• The Government will secure additional revenue from increases in vat, excise duties, corporation and income tax (assuming continued profitability) when supermarkets increase the price of alcohol.
• Jobs in hospitality will be saved. Pubs will be busier that they would have been earlier. This results in additional revenue due to PAYE/USC/PRSI, vat and income tax etc being collected.
• Supplementary businesses will be impacted positively for example, musicians, taxi drivers, fast food outlets etc from the additional numbers frequenting the pubs and hence the additional revenues outlined above.
• This will also result in less social welfare payments and or emigration and boost employment and opportunities in the sector.
• A & E wards will not have to deal with as many alcohol related injuries/illnesses and as the nations health improves so will our core medical services and there ought to be a reduction in treatment and insurance costs.
• The Lonely Planet Guide describes the traditional Irish pub as a vital component of our tourist industry and a more competitive environment will allow it to flourish.
The biggest saving however is immeasurable. The societal damage that is being caused by the consumption of cheap alcoholic products is and will be devastating. Society and the family unit is in danger as it swaps the public house for kitchens and livings room where there is no closing time and no measures and no one to tell you you’ve had enough.
In the UK, certain cities are earmarked to undergo experimental minimum price charges in an attempt to close off the huge societal problems created by alcohol, its low price and ease of availability. Generations have been lost to the problem and the hope now is that futures may be saved. This is destined to be rolled out across worst effected cities and eventually there will be UK wide minimum price on alcohol sales.
A respectable rise in off sales prices is a positive move on all fronts. It won’t happen quickly enough and hopefully it will be high enough to affect the market place positively. The supermarket will not have to close if it increases the price of alcohol but a large number of Irish pubs certainly will without change.
A large number of our pensioners have and continue to receive letters from the Revenue Commissioners in respect of potential tax liabilities. This is obviously quite frightening and causes great anxiety especially to those that have limited or no experience in dealing with the tax authorities.
It is as a result of the Revenue receiving information from the Department of Social Protection (DSP) in respect of various pensions including invalidity, widows etc. These are taxable sources of income (should your total annual income exceed the thresholds outlined below) and changes in individual circumstances which have not been communicated to (or by) the Revenue up until now in some cases may trigger a tax liability or increase existing amounts due.
It is of no significance to those that have the Old age pension as their only source of income and only affects individuals with over €18,000 of pre tax income or married couples with over €36,000. The following is a quick guide to dealing with the issue:
1. Stop worrying. This may have no affect on your income and if any, it will most likely be a relatively modest amount.
2. Contact a qualified Accountant. Call right now. These are the professional people that have the experience and skills to solve this on your behalf and will put your mind at ease.
3. Provide the Accountant with all relevant information requested as soon as possible and then relax as they act on your behalf to put this behind you. Ensure you have agreed or at least estimated your fee before they carry out the work.
My office is available on 074 93 21222 or simply email paul@profinancial.ie.
If there’s anything you’d like to see on the site over the coming months, why not drop us a line and we’ll see what we can do
Over the next few days you’ll see some great new content coming to our site, each of the main services page has a short information video to help get a understanding of the products and services avaialble at Paul McGonigle.com
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