EBS rolled investment in absence of contact

Q

I took out an 18-month fixed term savings account with EBS. The account matured in December 2010. The EBS wrote to me at the time, but as I did not respond to the correspondence, they rolled over the money into another 18-month account paying 4.65 per cent.

I feel this is a poor return as EBS is now paying 6.25 per cent over the same period.

I approached the EBS and was told that the money was locked in but that I could withdraw up to 50 per cent.

Can I demand to have my money back with interest from December 2010?

- Mr PS, Dublin

A

The simple answer is no. Yours is a salutary tale of the importance of reading all the literature associated with any financial investment. You did not respond to correspondence from EBS regarding the funds when they matured and EBS has rolled the money into a default account in line with what it would have stated in its terms and conditions at the time you took out the original investment.

Imagine for a moment how irate customers would be if, in the absence of communication, an institution like EBS simply kept your matured funds on account earning nothing until you eventually contacted them.

You note that you gave no permission to roll over the funds but this will have been provided for in the original investment contract.

Claiming virtual loss against capital gains

Q

The answer to Mr VC in a recent column is not fully complete. Normally a loss on an asset can only be offset against a gain when the loss is crystallised. However, there is an exception to this, legislated for in S 538 (2) of the TCA 1997.

- Mr DF, Dublin

A

Well, what do you know? A common sense approach in the tax code.

I must admit, I have never come across this provision before but Mr DF, who works in this area, is quite correct. There is indeed provision under section 538(2) of the 1997 Taxes Consolidation Act for holders of shares that have diminished in value so much as to be effectively worthless to make what is called a “negligible value claim” to the Revenue.

This is possibly very good news for the holders of shares in most of the banks. However, the situation is not clear-cut.

I checked with Revenue which confirmed that, in terms of policy, it has been accepted that losses in shares of Anglo Irish Bank can be set against capital gains. However, no similar policy decision has been taken on the other banks.

The decision actually rests with your local tax office and applies to losses on any asset, not just shares.

The Revenue, if it grants the claim, allow what is in effect a “deemed” disposal of the asset in question. This means that there is a theoretical disposal (but not an actual disposal as the asset remains the property of the taxpayer).

The loss allowable is the difference between the original purchase price and the current market value, and this loss can be offset against other gains.

If the asset is subsequently disposed of, the negligible value used to calculate the loss becomes the new purchase price, and any gains are measured against this figure.

The best advice, in the circumstances, is to make a claim in respect of your bank shares.

Either Revenue agrees and you benefit or it does not, in which case you are no worse off than you are now.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@irishtimes.com