Q&A: Q In 2005 our daughter and her then partner bought a house in joint names on a 25-year mortgage. Her partner had previously owned a property. This was her first purchase. The entire purchase was treated as not qualifying as a first-time purchase for either party and so the full amount of stamp duty was paid. Was this correct?

They have now separated. The house remains in joint names and the mortgage continues to be paid, currently in full by our daughter.

With the recent changes in Mortgage Interest Relief allowances, would it be feasible to have the entire mortgage now treated as for a first-time buyer or at the least to have her portion [50 per cent] so treated.

Mr DD, e-mail

AWith finances becoming tighter in general, it is small wonder that people are looking to maximise the reliefs for which they might be eligible. However, the rules relating to first-time buyer status are fairly strict and the exceptions to those rules very limited.

Broadly, the rules state that anyone who, either on their own or jointly, has previously bought or built their own property is no longer a first-time buyer.

This clearly excluded your daughter from first-time buyer status at the time she and her partner acquired the property. Whether they were married or not at the time had no relevance to their status as first-time buyers for the purpose of this transaction.

There is a provision for people involved in the subsequent break-up of a relationship but, unfortunately for your daughter, it relates specifically to formal separation, annulment or divorce.

In that event, and assuming the family home had been the first acquisition by the couple, they will be entitled to be treated as a first-time buyer assuming they have left the marital home, retain no interest in it and their former spouse continues to live there.

Even allowing for the marital status issue, as your daughter remains in the property bought jointly with her former partner, I cannot see how she will be treated as a first-time buyer – even for 50 per cent of the property. There is simply no mechanism for turning back the clock on a deal.

Does property gift stand as a purchase?

Q I was gifted a joint share in a house in 2002 by my mother, and acquired full ownership in 2004 following her death. I have lived in the house for 10 years and want to move to an apartment in town where I will be getting my first mortgage. What relief will I be entitled to on mortgage interest and how do I apply for it?

I will be letting out the house until I decide what I want to do with it. Given that the house is now worth similar to what it was when I acquired full ownership of it, what capital gains tax would arise if I were to sell, and would there be a tax disadvantage to renting it out for several years in the hopes of making a larger gain then?

Ms CK, Dublin

AThere are two very distinct issues here and, I'm guessing, the confusion relates to the first. Essentially, you need to know whether you will be treated as a first-time buyer for the purpose of mortgage relief if you buy this apartment.

As you can see above, a first-time buyer is considered to be someone who has never purchased or built a property. They need also to live in the property they are now purchasing and not to rent out part of it to other people, except under the rent-a-room scheme.

You, presumably, would argue that you have neither bought nor built a property previously, given that your current home was acquired in part by gift and thereafter by inheritance.

However, the Revenue view would be that those two transactions are the same as a purchase of your current property. As such, you are unlikely to be considered a first-time buyer in relation to the acquisition of the apartment that you are considering.

On the second issue, for the purposes of capital gains tax, the value of your property is the value at the time you acquired it. In your case, half the property was acquired in 2002 and the balance in 2004. You will need to work off those two figures to determine the base value for capital gains tax purposes.

In general, there is no capital gains tax on the sale of a principal private residence (main home). However, if you move out of that property and then rent it, it is a different story. Once the property is rented, it becomes liable to capital gains as an investment property.

What happens is that the capital gain on the sale of the property is apportioned between the amount of time you lived there as owner-occupier and the amount of time for which it was rented. It is worth noting that the last year of ownership is considered as owner-occupation whether the property is rented during this period or not.

So, for example, let’s say you acquired the property in 2002 and lived in it until 2009. You then rent it for three years, selling it in 2012. The seven years you lived there and the last year of ownership are considered owner-occupation, with the house considered an investment property for the other two years.

When it comes to tax, you would be liable to capital gains tax on two-tenths of the capital gain made on the property between the time it was acquired and the selling date. Of course, you deduct from that your €1,270 annual capital gains tax allowance.

Duration of bank guarantee scheme

Q Have we one or two bank guarantee schemes currently in operation? Last September 20th, your colleague Patrick Logue wrote an article where he stated the Government had increased the amount of the deposit guarantee from €20,000 to €100,000 for depositors in all banks, building societies and credit unions trading in the 26 counties.

This was the first change in the amount since 1999.

The Government made another announcement at the end of September guaranteeing all deposit amounts in named banks/building societies for a two-year period.

Am I correct in assuming that at the end of the two-year period, the €100,000 deposit guarantee will still stand?

Mr MW, Kerry

AYou are quite correct. In mid-September, the Government expanded the existing Government deposit guarantee in an effort to reassure bank depositors about the safety of their savings.

The previous thresholds under the scheme had not been changed for some time and were seen to be out of date.

Subsequently, when it became clear that one or more banks was on the verge of collapse, the Government announced a blanket guarantee on all deposits in six listed Irish financial institutions – Allied Irish Banks, Bank of Ireland, Anglo Irish Bank, Permanent TSB, EBS and Irish Nationwide.

Postbank, the An Post/Fortis joint venture, later joined the guarantee scheme.

That guarantee is for a period of two years only – expiring on September 29th, 2010 – unless it is extended.

Thereafter, as you surmise, the €100,000 deposit guarantee per person per institution remains in place.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2 or by e-mail to dcoyle@irishtimes.com. 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 questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.