Interest free loan, CAT implications.

[Every_blooming]

Hi,

Looking for advice regarding my situation. Loaned my long term partner €200k in 2022 to help reduce mortgage principle. ( rise in interest rates made repayments difficult) we typed up an interest free loan agreement and we both signed in the presence of a public notary to make it official. Agreement stipulated repayments would begin on when partner resumed employment (currently not working for health reasons)
Fast forward 2 years we are due to be married this autumn.
Enquiring to know what becomes the status of the loan one we are married? Do revenue still require it to be repaid in full or if it is forgiven after we marry does the CAT liability go away?

 

[jpd]

What CAT liability?

CAT only arrives if a gift is given

There is no CAT on transfers between married couples

 

[Brendan Burgess]

CAT only arrives if a gift is given

Is there not a gift of the interest forgone?

I would say €200k @1% = €2,000 of a gift per year.

As it's below the €3,000 small gift exemption, then no CAT liability.

In any event, Revenue is not interested in such arrangements unless they are much larger and designed to avoid tax.

Brendan

 

[Every_blooming]

Is there not a gift of the interest forgone?

I would say €200k @1% = €2,000 of a gift per year.

As it's below the €3,000 small gift exemption, then no CAT liability.

In any event, Revenue is not interested in such arrangements unless they are much larger and designed to avoid tax.

Brendan

 

[jpd]

There was no interest due till partner restarted working, so no interest foregone

 

[Gordon Gekko]

There was no interest due till partner restarted working, so no interest foregone

People seem to be talking at cross purposes. When you don’t charge interest, there’s deemed interest for the free use of the money. It’s the deposit rate the lender could have got. Something like 1% is below the €3,000 Small Gift Exemption.

When they get married, simply forgive the loan which is a tax-exempt gift.

 

[Every_blooming]

Thanks for your replies, in relation to CAT on the free use of the loan we do have a liability as in 3% ( best current savings deposit rate is what revenue use I think?) of €200k is €6k, minus the 3k small gift exemption leaves 3k outstanding which is well below the group C threshold.
My main concern is if revenue ever looked down the line ( I'm self employed) they might query the authenticity/validity of the loan despite having a signed agreement, and claim the loan was a gift?

 

[Gordon Gekko]

Thanks for your replies, in relation to CAT on the free use of the loan we do have a liability as in 3% ( best current savings deposit rate is what revenue use I think?) of €200k is €6k, minus the 3k small gift exemption leaves 3k outstanding which is well below the group C threshold.
My main concern is if revenue ever looked down the line ( I'm self employed) they might query the authenticity/validity of the loan despite having a signed agreement, and claim the loan was a gift?

No chance. A loan isn’t a gift. You have it papered and all. Also, it’s the best call deposit rate for that sum. 1% is grand.