Is there tax on inter family loan ?

O

oldnick

Registered User
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If I lend my child (or any relative) 100.000 euros are there any tax consequences like B.I.K ?

And if that child puts the money in a bank account can she reclaim the DIRT because she has no other income ?
 
Unless she's over 65 or permanently incapacitated then her income being below the limits for income tax will not exempt her from DIRT in any case so if that was the motivation then I'm afraid it's not a flier however if you have other reasons then I don't see any problems (apart from questioning the wisdom of giving 18-year-olds large sums of money )
 
I know DIRT must be paid but i do believe Revenue will refund it if one's total income allows it. That is, if one earns nothing or little one can claim one's money back.

I'm less sure of loans between family and the tax consequences of that.

If there is no tax on inter family loans and my daughter decided to put her loan in an interest bearing account and claim a refund on the DIRT would that arouse Revenue's ire?.
 
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Mrs Vimes said:
Unless she's over 65 or permanently incapacitated then her income being below the limits for income tax will not exempt her from DIRT )
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As Mrs Vimes says you can't get a refund of DIRT unless your over 65 or permanently incapacitated. Having no other income is irrelevant.
 
Blow! that's one wheeze out of the picture.
Might as well give her a property now where she won't pay any tax on the rental income until she starts earning, rather than me paying over 50% tax on it.
Now surely that'll work ?
(Property value under threshold. I know it'll affect the eventual inheritance tax situation. )
 
So your motivation is to minimise tax? Because as a landlord you are now paying tax at the higher rate etc.

Have you tried involving your daughter in the rental business to see how she gets on with it and see if she is able for the responsibility.
 
yes, bronte -am looking for ways to avoid tax. (Whatever is legally allowed as I'm too cowardly at my age to start tax-dodging).
Good idea what you say about getting her a bit involved. Good training for future life in any job -dealing with tenants and sometimes having to be a bit strict -plus builders,decorators and utility people and bills etc.
Thanks.
 
oldnick said:
If I lend my child (or any relative) 100.000 euros are there any tax consequences like B.I.K ?
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Yes.

If you're not charging her interest (or an "arms length" amount of interest), the interest that she's not paying is treated as a gift.

Unlike a preferential loan, there's no "specified rate", so it's reasonable to ascertain the interest rate applicable to a comparable loan from a bank, and apply that rate to your loan in order to calculate the notional interest.

That's then subject to gift tax.

Important to remember the annual small gift exemption (€3,000) with such loans. For example, each parent can advance an interest free loan to their child with notional interest of €3,000 arising annually without eating into the child's Group A threshold.
 
Hi all.

So if Im looking at best method to transfer 100k to my adult child, it should be a loan?

If it was a personal loan, with some nominal rate of interest agreed, this isn't regarded as a gift (naturally) and so their gift tax threshold (250k) is unaffected???

Have I got that right? But if no interest was applied to the loan, .... What happens?
 
im more confused now.

Does this mean a personal loan agreed with an interst rate would affect receivers gift tax threshold?
 
I doubt Berties dealings are any model to base my future transactions on ...

Seriously though. Im hoping someone can confirm my understanding (misunderstanding?) above?
 
L0llip0p said:
I doubt Berties dealings are any model to base my future transactions on ...

Seriously though. Im hoping someone can confirm my understanding (misunderstanding?) above?
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Bertie's case is an extremely useful precedent, illustrating perfectly the distinction between loans and gifts.

If you're still in doubt and/or are likely to be worried by this, it should be worth your while getting specific professional advice.
 
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