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.

Capital gains

After reviewing my sales and purchases of shares for current tax return, I find that I have made a loss of approximately £2,000 on the dealings (hence no CGT liability this year). Can I offset this loss against a capital gain of around £4,000 arising in the following year (which I know I will have), before calculating any CGT due in that year?

Mr D.M., e-mail

Yes. The logic of capital gains is that it is a tax on windfall profits on investments. If you have made no profit, you have no liability to the tax. Similarly, if you make a loss one year, it would seem unreasonable to tax you on subsequent profits when you are, in effect, only returning to a break-even situation.

Of course, all this is predicated on one making an actual loss through the sale of poorly performing investments. A classic recent case would be those investors who borrowed to acquire Eircom shares. Many would have been forced by the weight of debt and doubt to cut their losses and trade in the stock below its flotation value. They would be allowed offset this against subsequent gains on other shares at a later date. Naturally, people who can tend to hold on to loss-making shares unless they make a judgment that the stock is one that is unlikely to recover or that may even fall further.

The other point to note is that, as you say, the loss is offset against gains in later years. You cannot avoid paying capital gains tax due because you have made a loss subsequently. Any loss can only be carried forward and offset against gains incurred after the year in which the loss occurred.

Letting

I have recently bought a house in Ireland and I am considering working abroad for a year or two. I would hope to rent the house for about £800 a month. Could you tell me what tax I would pay? Also, I recently heard that you can receive £6,000 in rent a year tax-free if you have a mortgage. Is this right?

Ms A-M.F., e-mail

While there are areas regarding taxation on your earnings that you would need to look into if you are planning to work abroad for a year or two, the situation with rental income is quite clear. Any income from renting your home will be taxed here in Ireland.

If you rent through an agent, it will be the agent's responsibility to ensure tax at the standard rate after expenses are deducted before any rental income is remitted to you or your bank. If you are letting directly, the tenant has the responsibility to deduct the tax and send it to the Revenue Commissioners. I know this sounds onerous for tenants but that is the law as it stands.

At the standard rate - currently 22 per cent but falling to 20 per cent in April - you will pay about £176, falling to £160, a month in Irish income tax, assuming you have no expenses and that you apply to be treated as an emigrant for income tax purposes. Otherwise, you could end up paying tax at your marginal rate - currently 44 per cent and falling to 42 per cent in April - bringing your bill up to £352, falling to £336. While only the standard rate would be deducted from your rent, it would be up to you to declare any further liability in your end-year tax return.

As to the £6,000 tax-free rental income if one has a mortgage, I have never heard of it and am fairly sure no such provision exists. In fact, while you may avail of mortgage interest relief while you occupy the house yourself, you will no longer be able to do so when you rent it. In effect, you lose out on mortgage interest relief by choosing to rent your property for whatever reason.

Stock prices

For some years now I have been following share prices, as a result of investing in an Irish property company that is quoted on the Dublin Stock Exchange. McInerney Holdings is quoted at a certain price on the Dublin x-change and is quoted on the London Stock Exchange as well.

My question is how can a company have two separately quoted prices on two exchanges? Even when the rate between the pound and sterling is taken into account, there still seems to be a margin between the two prices. At the moment it is not great, but on occasions I've noticed it can be quite substantial. This also applies to other companies quoted on the two exchanges.

Mr A.McD., e-mail

There is an increasing number of public companies taking listings on different exchanges. This is particularly so with companies on smaller exchanges like Dublin, where liquidity and international institutional investor interest is relatively low.

Such dual or multiple listings are not mirror listings as such, although they do generally reflect one another reasonably closely as they are, after all, the price of the same shares in the same companies. If there were too noticeable a difference over time, the investors and/or market-makers would flock to the market with the lower price and sellers to the market with the higher one.

Because of such basic laws of the market, the prices tend to stabilise against one another over time, allowing for currency variations.

If the share strikes a price on one market, you see the equalising process at work in the next deal struck on the other market(s) on which the stock is quoted. Where discrepancies appear, as with the ones you noticed, it is with stocks in which there is little trade. Using your example of McInerney, the share closed one day recently in London at 148.5p sterling or just under €2.34. In Dublin that same night, it closed at €2.41. Not much of a difference.

All things being equal, the next trade on either market will see the prices move closer. Of course, factors affecting stock performance change all the time as investor confidence, company news and economic news disseminate. Still, there is no reason why the prices would show a significant gulf for any prolonged period of time.