CAT on Gifts from Parents

[Unknown_Joe]

I have a query into the application of CAT on the gifts that I have received from my parents so far.

I have received a cash gift of 100k and a property that has been valued at 250k, bringing me over the threshold of 335k (individual yearly gift allowance of 3k per parent accounted for). I intend to send back 15k prior to the completion of my tax return

Is it possible to arrange the transfer as a part-gift and part-loan?
A gift of 150k of the property equity, and a loan of 100k (at current deposit account interest rate of 0%). Then using the yearly gift allowance to bring the loan down by 6k per year without making any repayments.

This brings me below the 335k CAT allowance for the future, without the need to repay the 15k this year. Is this possible or is there anything I could have missed?

Please let me know if you require any further information,
Thanks, Joe.

 

[Gordon Gekko]

Hi Joe.

‘No’ is the short answer, because that would be tax fraud.

In your own words, you received a gift, so retrospectively recharacterising it as a loan is sailing too close to the wind.

Gordon

 

[Bluefin]

Hi Joe.

‘No’ is the short answer, because that would be tax fraud.

In your own words, you received a gift, so retrospectively recharacterising it as a loan is sailing too close to the wind.

Gordon

5k tax on 350k gift is way to much tax to pay in a modern country for all the free services we receive!!!

 

[Unknown_Joe]

Hi Joe.

‘No’ is the short answer, because that would be tax fraud.

In your own words, you received a gift, so retrospectively recharacterising it as a loan is sailing too close to the wind.

Gordon

Hi Gordon,

Thanks for the reply, I just have a follow on query.

The fact that the property has been signed over to me this tax year & I have not yet completed an IT38 for it, does that not mean I still have time/scope to finalise the characterisation/breakdown of the gift/part-gift?

So I would not be recharacterising the gift or defrauding on tax as I have not declared it yet?

Thanks,
Joe.

 

[NoRegretsCoyote]

In your own words, you received a gift, so retrospectively recharacterising it as a loan is sailing too close to the wind.

It depends on what "retrospectively" is here.

If the gift is very recent and you want to characterise it as a loan then I don't see how it is an issue. If the transfer was made in January and you sign a loan agreement with your parents today I don't think this would look too unusual. Families work differently from what Revenue would expect from a corporate deal.

If you are doing it for a transfer made several years ago then it would very much look like something highly artificial.

 

[Gordon Gekko]

Nah, that’s a scam.

If I gave you an apple in January, it’s sharp practice to pretend it’s an orange in May.

 

[NoRegretsCoyote]

If I gave you an apple in January, it’s sharp practice to pretend it’s an orange in May.

I think a four-month delay in formally agreeing a loan within a family would not be seen as unusual. Child in a panic needs funds to clear a sale, parent makes transfer in a hurry. Once the dust settles they reflect and formalise the arrangement.



In the OP's shoes I would just pay the €5k CAT so as not to invite further scrutiny of my tax affairs. But the scenario I described above would not be unusual.

 

[Gordon Gekko]

I think a four-month delay in formally agreeing a loan within a family would not be seen as unusual. Child in a panic needs funds to clear a sale, parent makes transfer in a hurry. Once the dust settles they reflect and formalise the arrangement.



In the OP's shoes I would just pay the €5k CAT so as not to invite further scrutiny of my tax affairs. But the scenario I described above would not be unusual.

Maybe in Fianna Fail circa 1986.

I’ve never come across anyone who gifts money to someone and then decides four months later that it was in fact a loan.

Let’s call a spade a spade…such a scenario is a tax dodge and Father Ted meets 1980s Ireland.

 

[AAAContributor]

I have received a cash gift of 100k and a property that has been valued at 250k, bringing me over the threshold of 335k (individual yearly gift allowance of 3k per parent accounted for). I intend to send back 15k prior to the completion of my tax return

Did the disposal of the property to you by your parents give rise to a capital gains tax (CGT) liability for them?

If CGT did arise, you could receive a credit for this against your capital acquisitions tax (CAT) liability, potentially reducing your CAT liability to zero, and you would not have to return €15k to your parents.

 

[Bill90.]

Hi Joe.

‘No’ is the short answer, because that would be tax fraud.

In your own words, you received a gift, so retrospectively recharacterising it as a loan is sailing too close to the wind.

Gordon

How would it be tax fraud?. Don't the multinationals structure things within the realms of legality to reduce their bill to near zero.

If its plausible then I don't see the issue. I'm not an accountant but I would pay to see a specialist on the matter and have my ducks in a row.

 

[Bill90.]

5k tax on 350k gift is way to much tax to pay in a modern country for all the free services we receive!!!

Free services? Are you having a laugh?. We pay through the nose for everything. I paid 30k in cgt last year and spent 38 hours waiting in A&E last week. Some bang for my buck there.