CAT Tax / Gift or Loan of €200k to buy house

Hi all,

My grandmother is giving me €200,000 to go towards the purchase of a house. We wont be looking for a mortgage and intend to buy property as cash purchase.

We're not sure whether to treat it as a gift or whether it might be better for her to say that she's gifted me €32,500 and that the remainder is a loan.

Does anyone have experience of loans from family? Do you have to have a formal agreement written up? Do you have to start paying back straight away and on a regular basis? What if I were to put monthly money to one side as repayments and only pay her back on an annual or bi-annual basis?

If the loan is €167,500 (€200,000 less €32,500) would this loan need to be declared? I assume so but the guidance online is confusing as it mentions a €335,000 threshold.

Just wondering what would be the best option. Any advice greatly appreciated.

Definitely seek professional advice on this one but my novice opinion would be to

Yes take the CAT group b gift (have to declare with Revenue even tho no tax owed)

And write up a loan agreement with a solicitor to keep it above board.

Loan repayments can be whatever you like, she might be able to forgive 3k a year as the small gift allowance (again I'm not sure so seek proper advice before doing anything).

335k threshold is likely CAT group A from parent to children so non applicable here.

There's something about the loan interest being equal to what she would make if the money was on deposit in her bank account, up until recently that was practically zero.

This is not just about Tax. The tax treatment should follow what is actually agreed.
If you actually agree that it is a loan, that might be fine for tax (see other posters above), but there may be other legal repercussions - for example when she dies if you have not repaid the loan her estate can pursue you for it, and whoever would benefit under her estate can force the executor/administrator to pursue you for it. And even if they don't, the write-off would then be a gift.
Be careful.

Always draw up a contract to cover yourself. If the loan is meant to be genuine treat it as so. I have heard of Revenue treating a loan as a gift as the contract in place was badly set up if I recall their was no mention of payments only annual gift exemption being used.
I would insert an interest rate but have logic behind it. ie interest rate is based on payout rate of prize bonds.
There should be no issue using the annual gift exemption as long as its part of a wider payment plan.
Familyman also makes a good point about what happens when you grandmother dies this should be discussed and outlined as well.

If you intend to repay it, then it's a loan. But if you don't intend to repay it, then it's a gift.

If it's a gift, treat it as a gift and pay the tax.

Whichever it is, get a document from your granny to say that it is a gift. So that when she dies, her Executors don't say that it's a loan which you must repay.

Brendan

If she is selling an asset e.g. shares to get the money to give you, it may be more tax-efficient to gift you the shares.

If she has a CGT liability on the shares , you can set that liability off against the CAT on the gift of the shares.

If she sells the shares and gifts you the proceeds, there is no such set-off.

Brendan

Brendan Burgess said:

If you intend to repay it, then it's a loan. But if you don't intend to repay it, then it's a gift.

If it's a gift, treat it as a gift and pay the tax.

Whichever it is, get a document from your granny to say that it is a gift. So that when she dies, her Executors don't say that it's a loan which you must repay.

Click to expand...

100%

The concept of a loan from one's granny makes no sense.

The OP should thank their lucky stars, cut the nonsense and pay the tax, stiff and unjust as it all is.

If you wanted to be fully tax efficient, your granny could gift €19,250 (€16,250 group C threshold + €3k annual exemption) to your spouse and save you ~€6.5k in tax

Granny may wish to only leave money to grandchild of course but worth a suggestion to save a bit of tax

Your opinion doesn't count. Only the Revenues interpretation counts. I doubt a child is in a position to buy a house.
You are v. lucky to have a wealthy granny, pay the tax and move on.

Folks

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As this question has been answered, I have closed the thread.