In 1995, when an insurance policy matured, I gave each of our five children £5,000. Since then, I have given them sums of up to 0,000. Should these gifts be declared to the tax authorities?
Gifts to children
Mr C.McL., Dublin
It's unlikely that you would have to declare the gifts to the Revenue, as there is a degree of flexibility in gifts between family members.
The tax at issue is capital acquisitions tax, also known as inheritance or gift tax. It lays down a series of thresholds above which tax has to be paid at 20 per cent. The thresholds vary according to the relationship between the person making the gift and the person receiving it. They also change from year to year.
The threshold for gifts and/or inheritances from a parent to a child is the highest, and currently stands at more than €460,000, so I cannot imagine that you will find yourself owing the Revenue any tax.
The Revenue position is that you only need to notify it in situations where the amount of the gift, or inheritance, is 80 per cent or more of the relevant threshold. Clearly, the sums to which you refer do not qualify on this basis.
A further point to note is that you are entitled to gift €3,000 a year to any person without it taken into account for the purposes of calculating liability to capital acquisitions tax.
Irish Nationwide
My wife and I have had a joint savings account (quarterly deposit) with the Irish Nationwide Building Society since the end of September 1997. During that period, the balance has never been lower than €5,000, which is the current balance. Can you advise us if we would be entitled to any share offer/dividend or cash payment if and when the Irish Nationwide decides to demutualise and become a plc?
We are under the impression that a deposit account must have a minimum balance of €20,000 to qualify.
However, given the length of time we have had a savings account (seven years plus), we were wondering if we would be in line to receive anything? Is it worth our while to keep this account open, given the current low interest rates?
Mr M.C., Dublin
There has been some quite irresponsible harping on about the €20,000 threshold for people looking to qualify for a windfall in any eventual demutualisation of Irish Nationwide.
It is true that people who are not currently members of the building society and who want to open accounts that will make them eligible for a windfall will have to deposit €20,000 - and make sure that the balance of their account does not fall below that level at any stage prior to the windfall determination date.
However, this has no bearing on existing members.
The only threshold that matters for existing members is the threshold that existed at the time they joined the society.
Under the legislation, governing building societies, this is €127 (or £100 in old money).
Irish Nationwide did raise the threshold as speculation mounted about their intentions to demutualise. This was to deter carpetbaggers and they are entirely within their rights to do so, but it is not retrospective.
As long as your account balance does not fall below the threshold in place at the time you joined, you are eligible for any future windfall on this measure.
The relevant thresholds are:
Date Amount
Jan 10th, 1996 £1,000
May 6th, 1997 £3,000
Sept 1st, 1997 £5,000
Dec 1st, 1997 £10,000
Mar 1st, 2002 €15,000
Mar 1st, 200320,000
Given the stated intentions of the society, you would be foolish at this stage to close the account.
It appears that the windfall could amount to more than €7,000 per account. A joint account will qualify eventually for a single windfall payment.
The other critical thing for account holders is to ensure that the particular type of account they hold qualifies them for membership. Not all accounts do.
There are share accounts and ordinary deposit accounts; only the former qualify for membership. You can check with the society to see if your account qualifies, but the easiest way to determine it is whether you receive notification of the society's annual general meeting each year.
Only members are entitled to attend that gathering and if you have received such notification, you can be confident that your account qualifies you as a member.
By the way, it doesn't affect you, but it is also worth noting that, even if people do have a spare €20,000, they are not guaranteed a windfall.
A second condition states that you must have been a society member for a full two years on the date the demutualisation is announced to benefit from the process.
With Irish Nationwide keen to demutualise as soon as possible, and the enabling legislation to allow them to do so working its way through the Oireachtas at the moment, it is unlikely that any members joining now will have sufficient time under their belt to qualify for a windfall - although you never know.
As a qualifying member of Irish Nationwide Building Society and, assuming that the required legislation is put in place by the Government, what time period would you expect a payout to take place within?
I read that it would take between 12-18 months for the sale process to happen. Is it at the end of this sale process that a payout would be due?
Mr M.D., Dublin
The first thing is that you can rest assured the relevant legislation will be passed. It's really only a question of when.
While Irish Nationwide chief executive Mr Michael Fingleton and his team was hopeful this could be fast-tracked, it does seem as if the Government is in no real hurry on the issue - largely, one presumes, because it will be seen as facilitating significant windfalls for building society executives (sums that are likely to put what the members get in the shade).
The legislation is now expected to be in place by year-end, according to a government spokesman quoted last week. Whatever happens, it will be well on the statute books by the time the Government next has to go to the polls.
The more important issue, for you as a member anyway, is when you can expect to receive any windfall. That is impossible to tie down at this stage, although you are quite correct when you say that it will be at the end of any sale process.
My understanding is that, once the legislation is in place, the society will demutualise.
However, there will not be a windfall at that time. Rather, the members will simply become part owners of a non-mutual company.
Mr Fingleton has previously told members that it is only when the Irish Nationwide is eventually sold to a third party that the issue of a windfall will arise. Back when the members voted to demutualise last June, he estimated that this could take 12 to 18 months, which would bring you up to the end of 2005.
However, the delay in introducing the legislation will be pushing back this timetable and I would suggest you might have to wait until the middle of 2006, or even later, before you see any money from your Irish Nationwide membership. Still, the €7,000 should be worth waiting for and it could be more.
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. No personal correspondence will be entered into.
