Court awards: My daughter was awarded a small amount of money by the courts arising from an accident she had in 1991 when she was six years of age. The money was held and invested on her behalf by the courts. Having now reached the age of majority (18), she requested a statement of her award.

The courts have a legal obligation to protect the interests of the child and must invest the money on the child's behalf under the Trustee (Authorised Investments) Act 1958 and the Trustee (Authorised Investments) Order 1958.

It is easy to see that in today's economic climate, with very low interest rates, it is difficult for awards to keep their value. In my daughter's case the current value of the award is vital as it has to meet medical costs still to be incurred.

Surprised by the figure she was given for the current value of her award, my daughter requested details of the interest credited over the years involved. She then discovered that DIRT has been deducted off the small interest she received each year. She submitted tax returns for all the years involved 1997/98 - 2003 inclusive and was shocked to be informed that she is not entitled to a refund of the DIRT tax deducted for any of the years. Her income for all years was below the threshold for tax liability.

Was DIRT intended to tax six year olds on the paltry amount of interest they earn from an accident claim?

If the money had been given to us, her parents, we would have ensured that it was invested in a place that did not attract DIRT.

Is there any way in which children of the State can reclaim DIRT taken off the money they are awarded by the courts? Incidentally, a letter from the courts service tells us "if a minor or guardian wishes to reclaim DIRT they are directed to the Revenue Commissioners".

I would be very interested to hear from other parents in the same position.

Mrs E.O'D., Dublin

It's no consolation to you or your daughter who, as you say, still faces medical costs in relation to her accident all those years ago, but it seems unlikely that she is entitled to any refund of DIRT.

It's not possible to give a more definitive answer because we would need more information.

Ms Eimear Thornton, a director of Deloitte's tax department, points out that there are stringent rules in relation to DIRT and these allow for very limited cases in which it is refundable. Lest you blame the courts service, Deloitte points out that the institutions deducting DIRT have no discretion on the issue for Irish residents. DIRT must be deducted and can then be claimed back by certain "qualifying individuals".

Refunds are available essentially only to people over the age of 65 who are not liable or not fully liable to income tax and to people who are permanently physically and/or mentally incapacitated.

Lump sums invested on behalf of this latter group are free of tax both on income they provide and on any capital gains made while they are invested. Income arising out of such funds must also be the main income of the person concerned.

Given that your daughter still has the prospect of treatment ahead of her, the question is whether she could be said to be permanently and totally incapacitated by her injuries from maintaining herself at the time of the claim. The timing is the key thing here.

Outside of these restrictive circumstances, there is no way DIRT can be reclaimed off court awards.

While it does indeed seem unfair that people with no tax liability, such as children, should be held liable for DIRT, that has always been the case. Every child with bank deposits has been paying DIRT for years. The simple truth is that tax is never necessarily fair.

The more important question it raises is whether the courts service should be investing such awards in accounts that are liable to DIRT. The fact is that there are other investment options where people with no other tax liability, such as minors, will not face tax bills on income or capital gains below certain thresholds.

There is also the obvious example of An Post savings certificates which are tax-free, State-guaranteed, and offer at least as good a rate of interest as any standard bank deposit.

As you say, if you as parents had been investing this money, you would have taken steps to avoid unnecessary tax liability. The State, acting on your behalf, does not seem to have done so.

As for the comment from the courts service directing your daughter to the Revenue with the guidance "if a minor or guardian wishes to reclaim DIRT they are directed to the Revenue Commissioners", that should be treated with the contempt it deserves. It is nothing more than public service buck-passing and ill serves both your daughter and the courts service itself.

Nationwide

I have several accounts with Irish Nationwide. They are all mortgage accounts in relation to different properties. Will I receive a payout for each one when the building society demutualises?

Mr G.P., Dublin

It's a nice thought but I don't think it's going to happen. The general rule with demutualisations is that members are entitled to a single payout in respect of their membership.

What that means in practice is that you will receive one windfall as a saver, regardless of how many different savings accounts you hold and a separate one as a borrower, again regardless of how many different mortgage accounts you have.

In the case of Irish Nationwide, which is expecting a minimum windfall figure of €7,000, this means members with both a qualifying savings account and a qualifying mortgage account could receive €14,000.

Of course, this assumes that any accounts you have meet the minimum standards set down in the demutualisation programme. This has not yet happened, obviously, as the society is waiting for the passing of new building society legislation that will facilitate its intention to shed its mutual status. However, in general, the minimum thresholds for mortgage holders are accounts with more than €625 in them.

The qualification for savings is generally accounts with a minimum balance of €125. Of course, Irish Nationwide has gradually ratcheted up the minimum savings threshold for membership and, therefore, for eligibility on windfalls. While customers of long-standing who have maintained a minimum of €125 in their accounts should be all right, more recent members will have to have lodged up to €20,000 to open a membership account and will have to have kept that sum in the account as a minimum to qualify.

The accounts will also need to be open two years on the date the society formally announces its intention to demutualise.

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. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.