Brendan Burgess
Founder
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I have not seen this mentioned before
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www.irishtimes.com
since January, new rules have come into force. Critically, these apply not only to new loans after that date but also to any family loan taken out before then on which some repayment remains outstanding.
The main requirement will be for holders of certain family loans to file a capital acquisitions tax (CAT) return each year, part of a trend by Revenue to require more filing of returns from all taxpayers.
The rules apply to any “specified loan or loans” a person receives from a “close relative”.
Close relative is broadly taken to mean anyone covered by category A or Category B tax exemption categories for CAT. That includes parents, obviously, but also a parent’s partner even where they are not a blood relation. Then there are what are called lineal relations – siblings, grandparents, great-grandparents, and any sibling of either parent or either parent’s civil partner.
A specified loan is one on which no interest is paid in the six months after the end of each year and, importantly, where the loan balance at any time during that year – not just at year end – was in excess of €335,000. If you have more than one family loan, you would need to tot them together and ensure that, between them, they did not exceed that €335,000 limit at any point during the year.
The fact that interest is applied but not paid during the period – simply rolling up with the loan capital – does not exempt you from filing a return. Interest must actually have been paid to qualify for an exemption.
In fairness, that threshold is fairly high. Most families will be dealing with much more modest sums where they can afford to lend to family at all. That certainly applies in your case, where you are talking about a loan of €50,000 or thereabouts.
Under the new rules, there is no distinction between informal loans and ones for which full paperwork has been drawn up.
Rules change on interest-free loans to family members
Intra-family loans are very common in Ireland but all sides need to be aware of the rules if they want to avoid unwelcome tax bills
since January, new rules have come into force. Critically, these apply not only to new loans after that date but also to any family loan taken out before then on which some repayment remains outstanding.
The main requirement will be for holders of certain family loans to file a capital acquisitions tax (CAT) return each year, part of a trend by Revenue to require more filing of returns from all taxpayers.
The rules apply to any “specified loan or loans” a person receives from a “close relative”.
Close relative is broadly taken to mean anyone covered by category A or Category B tax exemption categories for CAT. That includes parents, obviously, but also a parent’s partner even where they are not a blood relation. Then there are what are called lineal relations – siblings, grandparents, great-grandparents, and any sibling of either parent or either parent’s civil partner.
A specified loan is one on which no interest is paid in the six months after the end of each year and, importantly, where the loan balance at any time during that year – not just at year end – was in excess of €335,000. If you have more than one family loan, you would need to tot them together and ensure that, between them, they did not exceed that €335,000 limit at any point during the year.
The fact that interest is applied but not paid during the period – simply rolling up with the loan capital – does not exempt you from filing a return. Interest must actually have been paid to qualify for an exemption.
In fairness, that threshold is fairly high. Most families will be dealing with much more modest sums where they can afford to lend to family at all. That certainly applies in your case, where you are talking about a loan of €50,000 or thereabouts.
Under the new rules, there is no distinction between informal loans and ones for which full paperwork has been drawn up.
