Lump sums from banks, are they taxable?

J

John Sipos

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Bank of Ireland are currently giving a 2% cash incentive (or "gift") to anyone who switches their mortgage to them. So if someone with a €350k mortgage switches they get a lump sum of €7k from the bank. Is this taxable?
As mortgage interest is covered by other relief schemes I can't see any cost to offset against this? Except maybe legal fees for switching but they are only a fraction.

Other banks also giving smaller amounts as a "contribution" to costs but same question applies if there is a surplus.
 
KlausFlouride said:
Came up on Mortgage forum, answer seems to be no

http://www.askaboutmoney.com/threads/boi-cash-back-tax-implications.194480/
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It's not clear and the speculation is that it's a "discount" or a "writeoff" neither of which is credible from a tax perspective.
They are going after AirBNB hosts even if under the rent-a-room threshold so I can't see them turning a blind eye here. It seems reasonable for AirBNB people to have assumed the room they were renting came within the relief. In the case of this lump sum though there is no obvious relief top assume.
 
John Sipos said:
It's not clear and the speculation is that it's a "discount" or a "writeoff" neither of which is credible from a tax perspective.
They are going after AirBNB hosts even if under the rent-a-room threshold so I can't see them turning a blind eye here. It seems reasonable for AirBNB people to have assumed the room they were renting came within the relief. In the case of this lump sum though there is no obvious relief top assume.
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What's not credible?

Let's say I'm selling you something, say a bag of magic beans, and you don't have cash to pay me. So we agree I'll give you the beans and a tenner in cash (to buy an axe), and you'll pay me x amount of money over y period of time...

Have I given you a gift of the tenner, or is it simply part of the transaction, which is a sale from me to you with a finance arrangement?

Now replace magic beans with digits in a bank account. It's no different.

You'd have to know how the bank account for it to know how it is best accounted for by the punter, but its certainly not a gift, any more than a reduction in interest payments when you refinance a loan with a cheaper lender is.
 
I think that the final loan becomes (say) 194k instead of 200k initially requested, it's a bit of a handwave, but as Jon Snow says, it's not a gift, as they are not giving you 6k in the first place. Also, you need to draw down your mortgage by 31st December to be eligible.
 
Jon Snow said:
What's not credible?

Let's say I'm selling you something, say a bag of magic beans, and you don't have cash to pay me. So we agree I'll give you the beans and a tenner in cash (to buy an axe), and you'll pay me x amount of money over y period of time...

Have I given you a gift of the tenner, or is it simply part of the transaction, which is a sale from me to you with a finance arrangement?

Now replace magic beans with digits in a bank account. It's no different.

You'd have to know how the bank account for it to know how it is best accounted for by the punter, but its certainly not a gift, any more than a reduction in interest payments when you refinance a loan with a cheaper lender is.
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You can't equate magic beans and digits in a bank account. Otherwise it's a huge tax loophole.
I'll see your hypothetical with this one: My employer gives me a bag of magic beans and a Grand and I agree to pay him 100 Euros over 5 years with the same type of terms you outline above? Is the €900 taxable? Of course it is (and in year 1!) Same for self employed. All those creative loopholes were closed years ago. Can't see this one being any different.
 
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