Legality And Tax On A Employer Loan To An Employee For Mortgage Deposit

D.S.H.05

New Member
Messages
3
We are looking to move up in houses, but we don’t quiet have the savings in place for a 20% mortgage deposit (€40k). Also, the house we are looking at will need some work and we estimate this at €30k.
The company I work for is willing to step in and loan us the full €70k required. This however has raised the question of legality and the tax and interest payable from us and the company. We have asked a financial advisor to investigate this for us, but we have got very confusing information back from them on the matter.
Basically, we are looking to get clarity on the following;
  • Can my company loan us €40k for the mortgage deposit and if not is there a way around it?
  • Is there a way of reducing the tax liability and interest on this loan for the employee and employer?
  • Can my company loan us €30k for the house renovation works and if not is there a way around this?
  • Is there a way of reducing the tax liability and interest on this loan for the employee and employer?
Any help on the above would be gratefully appreciated.
 

WizardDr

Frequent Poster
Messages
1,232
Preferential loans

A preferential loan is a loan made by you to your employee or former employee, or their spouse. It arises where the rate of interest applied to the loan in a year is lower than the specified rate. The specified rate is set by the Department of Finance.
A preferential loan is a taxable benefit-in-kind. Your employee must pay the following on the benefit:
Specified rates

Qualifying home loans4%
All other loans13.5%
Current rates specified by Department of Finance

This is straight from Revenue



The loan must be a qualifying loan
if it is the specified rate is 4%
if you are charged NIL then the BIK in respect of the three items is €2800 (€70,000 x 4%)
What this implies is that if you pay your employer interest then it is deducted from the above
The assumption is that the loan gets repaid.

All above board.

As usual this assumes you have given all the relevant information

Nothing illegal what so ever.

W
 
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