Intra-family short term loan

[fistophobia]

I am being asked to loan money to a family member, in order for him to buy a property.
The estate agent will only accept a cash buyer, which he is not.
His existing property is on the market, and its likely there would be a one month funding gap.
I am not concerned about the trust issue, as its family.
My main concern is any tax implications from such a loan.
Should I be doing anything to avoid hassle from banks or Revenue?

 

[Brendan Burgess]

No, Revenue has absolutely no interest in transactions like these if they are genuine and not some attempt to get around gift tax rules.

So if you lend a brother €300k interest free and he repays you in 6 months, there is absolutely no need to do anything about it.

In theory, you might say that your brother got a gift of €3k, the interest on the money, but that covered by the Small Gifts Exemption and so of no interest to anyone.



Brendan

 

[Brendan Burgess]

Should I be doing anything to avoid hassle from banks

Why would any bank be interested in this?

 

[fistophobia]

Thanks Brendan.
Do banks not have to report large transactions to Revenue?

 

[DublinHead54]

Why would any bank be interested in this?

Anti money laundering and fraud rules. Moving large sums of money around may be flagged by internally controls.

It wouldn't necessary cause an issue, just questions from the bank.

 

[Brendan Burgess]

Ah, OK.

The bank would not report it to Revenue and if they did, so what?

The bank may ask your brother questions and he says he got a loan from his brother.

I don't think that they will ask you any questions as presumably the money is already in your account.

Brendan

 

[ClubMan]

I'm not so sure that the advice given above is necessarily strictly correct.

Free use of property and interest free loans

This page details the tax implications of Free use of property and interest free loans

www.revenue.ie

Interest free loan

If you receive an interest free loan, this is a benefit and you may have to pay tax on it.

However, if the loan is for only a month or two then, depending on the size of the loan, any benefit in kind in the form of interest foregone may still come in under the €3k p.a. Capital Acquisitions Tax/Gift Tax small gift exemption.

Small Gift Exemption

Exemption from CAT on small gifts

www.revenue.ie

 

[Thirsty]

I am not concerned about the trust issue, as its family.

No disrespect to your family, but this is foolish.

Get a signed agreement in place.

 

[Brendan Burgess]

I'm not so sure that the advice given above is necessarily strictly correct.

ClubMan

There is no point in saying that the advice above is not correct if you are not prepared to point out exactly which bit is not correct and why.


Brendan

 

[Gordon Gekko]

I'm not so sure that the advice given above is necessarily strictly correct.

Free use of property and interest free loans

This page details the tax implications of Free use of property and interest free loans

www.revenue.ie

However, if the loan is for only a month or two then, depending on the size of the loan, any benefit in kind in the form of interest foregone may still come in under the €3k p.a. Capital Acquisitions Tax/Gift Tax small gift exemption.

Small Gift Exemption

Exemption from CAT on small gifts

www.revenue.ie

The advice is correct though…

The “free use of money” is calculated on the basis of what the lender foregoes in deposit interest.

i.e. negligible.