Personal Finance

Barry McCall gives us some tips on property investment and a brief history of St. Patrick's Credit Union.

Taxing Times

The Irish people have been a nation of property owners for many years, but now we are rapidly becoming a nation of property investors as well. In fact, many economists attribute our ongoing residential property boom to the influence of people buying properties for investment purposes.

And the many thousands of Irish people who have done so have certainly benefited with doubledigit capital appreciation on their investment in almost every year for the past decade. They have also benefited from reasonably strong rental yields over the same period. However, what many property investors fail to consider when assessing their investment is the tax implications. Rental income is taxed as normal income, whether the landlord is resident in Ireland or not. The tax is paid on the selfassessment system in the same way as for self-employed persons.

Capital gains tax of 20% is payable on any profit made on the property when it is sold. Various expenses can be offset against income tax. These include ground rents paid on the property, local authority charges, maintenance costs including cleaning, repairs and insurance, management costs including payments to a management company, expenses incurred in negotiating a lease, and accountancy fees incurred in preparing a rental account. Capital expenditure on items such as furniture and appliances can be written off on a straightline basis at a rate of 12.5% per annum. Also, mortgage interest can be offset against rental income for the purposes of income tax.

In effect, you have to look after your investment property as if it were a business. Full books of accounts should be kept and all receipts should be retained. Failure to do so could result in your paying a lot more tax than you should.

Many investment property owners are also benefiting from specific tax incentive schemes such as the Section 23 and Section 50 reliefs. These were aimed at promoting specific forms of development such as urban renewal, or the construction of student accommodation near third-level institutions. However, these quite generous reliefs have now largely expired.

This is not to say that it is not possible to invest in a property now and avail of such a relief. Generally speaking, an investor purchasing a Section 23 or Section 50 property which is less than 10 years old can avail of unexpired portions of the relief which was originally available on the property. However, where such relief is available, the property usually commands a high premium in the market and this may mean that it is not very attractive as an investment in the long term.

It is best to consult an accountant or a professional financial adviser before purchasing any property which might qualify for one of these reliefs, as they sometimes may not be as attractive a financial proposition as they first appear. Of course, you needn't have a second property to earn rental income. You can rent out a room in your home. There is a special scheme governing this and you are allowed to earn up to '7,620 in any one tax year without having to pay tax or PRSI from renting out a room. You do, however, have to include the income on your tax return. At the other end of the scale, there is also tax relief available to tenants of private rented accommodation. At present, an allowance of up to '1,650 for single people aged under 55 and '3,300 for single people aged 55 and over is available. The allowances for married couples are doubled.

To claim the allowance you have to be paying rent for private rented accommodation which is used as your sole or main residence. You cannot claim tax relief for rent paid to a local authority. Generally speaking, you will need a receipt for rent you have paid for the Revenue Commissioners. The receipt must show the landlord's name, PPS Number and address, the amount of rent which you have paid, and the period of time covered by the receipt.

St. Patrick's Credit Union (ESB Staff) Ltd.)

A Short History

St. Patrick's Credit Union was founded in October 1962. It all started in humble surroundings when it operated out of the drawer of an Engineering Officer's desk buried in the bowels of the old Fitzwilliam Street buildings, and is now in splendid accommodation on Herbert Place. Since its foundation, St. Patrick's Credit Union has been controlled and managed by an elected Board of 13 voluntary Directors, drawn from within the membership of the Credit Union, and to date over 70 individual members have served as Directors.

Originally the Credit Union served ESBOA members only, but in 1964 the Common Bond was extended to embrace all ESB employees. It was further extended in 1975 to include all pensioners of the company, and in 1990 employees of wholly owned subsidiary companies were included.

Other major milestones in the development of the Credit Union were salary deduction, which commenced in 1967; the provision of permanent accommodation and the subsequent employment of fulltime staff in 1970; the introduction of a Budget Account scheme in 1972; the computerisation of the accounts in 1974 (i.e. magnetic ledger cards); and the purchase of its first premises in 1982. In 1963, membership of St. Patrick's Credit Union stood at 227 with a combined share balance of £2,289. Membership now stands at 11,500 with total shares of '208 million and total loans of '80 million.

This success story can be attributed to many factors - the sound cooperative principles on which the Credit Union movement is based; the vision of the founder Directors; the dedication of Directors, Agents and Staff down through the years, the co-operation of ESB management throughout the 44 years; but most importantly the loyalty and confidence of the members who have consistently supported the Directors.