In this week's Q&A Dominic Coyle answers questions relating to credit cards and capital losses.

Stamp duty on credit cards

I got a Brown Thomas credit card (AIB Mastercard) in March 2003 and in April 2003, I was billed and paid the new €40 stamp duty.

Having only used the card two or three times, and not considering it good value, I cancelled the card in January 2004. I then received a letter confirming the cancellation and advising me that a further €40 stamp duty was due.

I rang AIB Mastercard and Brown Thomas and neither could explain how there could be two €40 stamp duty annual payments due in a period of nine months.

I now have a demand for this €40 stamp duty payment. Are they entitled to seek a further €40 stamp duty payment in the circumstances outlined?

Ms L.R., Wicklow

The bad news is that you are liable for the second €40 stamp duty payment, unfair as this seems. The problem is that you have fallen foul of an archaic matter of timing.

The tax year for the purposes of stamp duty on credit cards is April 1st to March 31st. This is despite the fact that the tax was introduced by the Minister for Finance, Mr McCreevy, after he had rationalised the tax year in relation to other taxes such as income tax and capital gains so that it matches the calendar year.

The second relevant issue for you is that the tax is retrospective. In other words, the money collected in April of one year relates to the previous tax year. This means effectively that people who had credit cards at the time the Minister made the announcement in his Budget speech in December 2003 were automatically liable to the tax even though they had not made a conscious decision to hold such a credit card with this cost factored in.

Turning specifically to your circumstances, it is pure bad luck that you chose to take out the AIB Mastercard through Brown Thomas last March. Doing so meant that in April you received a tax demand relating to the tax year April 1st, 2002 to March 31st, 2003. Effectively, you were paying stamp duty of €40 for the privilege of less than one month's usage of the card.

It is interesting, if not surprising unfortunately, that no one thought to mention this to you when you applied for the card as the €40 might have been the difference between making the decision to acquire the card in March good and bad value.

The stamp duty demand you face is in respect of the 12 months to end March 2004. Galling as it might be, I'm afraid you'll have to pay.

First active account

At the time of the Royal Bank of Scotland deal, First Active sent shareholders details of a special 10-day notice account available exclusively to them.

The account promised to track the current European Central Bank rate (currently 2 per cent) on deposits with a bonus 0.5 per cent until the end of March 2004. It stated that this would give "a total current gross rate of 2.5 per cent per annum".

Maybe my Leaving Certificate of 1943 just wasn't good enough but I cannot understand how getting 2.5 per cent for 3½ months and 2 per cent for the remaining nine-twelfths of the year can give a gross rate of 2.5 per cent per annum.

Ms M.O'N., Dublin

It's even worse than you think. You had to open this account by December 12th but the payout in relation to the Royal Bank of Scotland deal only came through on January 19th and, for most, this would form the bulk of their savings in the account. As such, the "bonus rate" of 2.5 per cent would effectively apply for less than 2½ months.

Having said that, First Active would appear to be within the letter of the law even if its statement is patently ridiculous. It would take a lot less than the Leaving Cert, even one dating back to 1943, to be able to work out that there is no chance of making 2.5 per cent per annum on this account in the circumstances outlined.

The best you could hope for is a fraction over the 2 per cent headline rate - assuming the ECB leaves its rate unchanged.

It would appear that, for as long as First Active offers the 2.5 per cent rate, it is at liberty to quote a "total current gross rate" of return of 2.5 per cent, if only to fuel people's fantasy.

People looking for such a short-term notice account would be far better to look at Anglo Irish's seven-day account offering a full 2.3 per cent per annum or its 21-day notice account, offering 2.5 per cent that you are likely to see.

Capital losses

A couple of weeks ago, in a reply about aggregating gains and losses before activating the capital gains tax relief, you said that capital losses were subject to the same rules as capital gains and so could not be transferred between spouses.

A provision of the Taxes Consolidation Act 1997 indicates the contrary.

Ms N.O'R., email

You are quite correct and thank you for providing a reference to the precise section of this colossal piece of legislation.

Section 1028 of the Act provides for spouses to transfer losses between them although they cannot do the same with capital gains.

This is the default situation and only if a spouse specifically elects otherwise will losses not be transferrable.

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.