Hi Brendan,
Ignoring company law aspects for a minute.
The maths here isn't perfect, but it'll show why the rate won't be dropped to 1.5%. I've only ever looked at this from a bank employer perspective, so the usual target is to lend at arms length so no BIK applies.
Let's assume a 100k loan here for illustration.
If my employer lends me money at 4% for a qualifying home loan, there is no BIK for me. There's no employer PRSI for the company.
However, I actually have to pay the 4%, so the company has taxable income of 4k.
Now, let's assume there's no interest charged.
I'm deemed to be getting 4k benefit subject to BIK. So 52% tax for me. leading to an effective rate of 2.08% to me. Add in employer PRSI, the effective rate is somewhere around 2.5%.
It all gets far more complicated if the borrower is a director / participant, and it's a close company, as there are other tax provisions.
It's rarely of much benefit to borrow from company Vs a bank, unless you can't borrow from a bank on normal commercial basis (e.g. poor credit history).