Revenue acting on deposits handed from parents

maggiepip

Mr. teddywinkles wrote: »

I went in for mortgage last year. Have very substantial deposit saved. The first question I was asked by her in the bank, was my money a gift. She seemed very concerned when asked. So dunno what that means

Probably only concerned as to whether you had demonstrated the means to save it yourself.

ted1

jon1981 wrote: »

Seems the revenue are going to start clamping down on the gift of deposits from parent. Seems to be a counter measure to the 20% deposit rule being introduced to reduce the advantage wealthy parents and their offspring have over other buyers in the market.

Apparently the tax legislation has always been in place but rarely acted on.

A low interest loan. Revenue are fighting an uphill battle

marathonic

Is this not more likely to be a retrospective audit?

What I mean is that, for example, if I received a gift of €30,000 for a house deposit a long time back and, in the meantime, my parent(s) have passed away.

If the inheritance tax was calculated using the full CAT allowance without considering the €30,000 gift, revenue would be fully able to chase me for the tax, penalties and interest on the tax due on the €30,000.

marathonic

ted1 wrote: »

A low interest loan. Revenue are fighting an uphill battle

All they have to do to prove that it wasn't a low interest loan is to prove that the parent hasn't been paying tax on the interest received.

I believe that the legislation even allows for the difference between the interest paid by the child and the market rate of interest, as decided by Revenue, to be classed as a gift from the parent to the child - eating further into the CAT group threshold if this exceeds €3,000 p/a (when bundled together with any other gifts the child may have received in that year).

Susandublin

The key question here is - how would revenue find out? A lot more people doing a lot worse and getting away with it. Keep the head down.

Pawwed Rig

Susandublin wrote: »

The key question here is - how would revenue find out? A lot more people doing a lot worse and getting away with it. Keep the head down.

And sure the Gardai may never find out if you do a bit of drug dealing on the side. A lot more people doing a lot worse and getting away with it. Keep the head down.

Attitudes like this...................:rolleyes:

marathonic

marathonic wrote: »

Is this not more likely to be a retrospective audit?

What I mean is that, for example, if I received a gift of €30,000 for a house deposit a long time back and, in the meantime, my parent(s) have passed away.

If the inheritance tax was calculated using the full CAT allowance without considering the €30,000 gift, revenue would be fully able to chase me for the tax, penalties and interest on the tax due on the €30,000.

My reading of it is as you say. They want to keep tabs on the amount gifted to a child to be taken into consideration should the parents Will that child more than the allowance.

murphaph

ted1 wrote: »

A low interest loan. Revenue are fighting an uphill battle

Agreed. At the end of the day if private parties are willing to hand over cash to other private parties without any formal record then it will be essentially impossible for Revenue to trace.

Parents gift in excess of 3k to kids probably thousands of times a year, none of which is traceable.

cpoh1

If you are receiving a gift from a family member for the deposit for your mortgage the gifter/parent must waive all interest in the money and subsequent property you are purchasing before the bank will sign off on the loan. This has to be a signed letter waiving all interest in the money gifted.

The "low interest loan" bit wont work unfortunately.

Mrs OBumble

Susandublin wrote: »

The key question here is - how would revenue find out? A lot more people doing a lot worse and getting away with it. Keep the head down.

It's called "audit", and you never know when today will be your lucky day :-)

Keep your head down, pray to whatever entity you believe in that no one ever notices or that if they do the penalties aren't too high.

Or contribute to society by meeting your legal obligations, including paying taxes that the government can use to pay teachers, nurses, etc. If you don't like the current legal obligations, use the political process to lobby to get them changed.



To me it's a no-brainer. YMMV.

Larbre34

Pawwed Rig wrote: »

And sure the Gardai may never find out if you do a bit of drug dealing on the side. A lot more people doing a lot worse and getting away with it. Keep the head down.

Attitudes like this...................:rolleyes:

Be careful, the oxygen is a bit thin up there.


If the state has put a revenue structure in place that is prohibitive to the advancement of the main exchequer contributors, i.e. employed private home owners, and those same people are able to arrange a private gift or loan that will not financially benefit them beyond enabling them to be housed, then most people will have little problem with it.

The problem is that the tax legislation needs to differentiate between capital acquisitions and the benefits that will derive from them. The state should recognise that enabling a family to be housed, thereby sparing social housing and welfare resources, is a net benefit to the state in the long run and it should be facilitated.

In any case, any half way useful accountant will create the structure to perfectly legally enable such a transfer.

marathonic

It's a lot easier for Revenue to find out about this than people appear to think. All it takes is a random audit.

For example, I believe Revenue need to be informed about bank transfers of above a certain amount (€10,000 i think). They also have access to a list of purchase prices for houses. Finally, they have access to information about inheritences.

Now, let's say the Revenue decides to get a list of all people who have paid any amount of inheritence tax during the past 10 years.

Then cross reference this list with a list of property purchasers during the last 10 years.

Then get a list of those that the bank have provided details of as having obtained a large bank transfer during the year preceeding the property purchase.

If the revenue get a list of people common to all three lists and perform a tax audit on those that appear on the list, they will surely be able to trace whether that large bank transfer has come from a tax compliant source.

Pawwed Rig

Larbre34 wrote: »

If the state has put a revenue structure in place that is prohibitive to the advancement of the main exchequer contributors, i.e. employed private home owners, and those same people are able to arrange a private gift or loan that will not financially benefit them beyond enabling them to be housed, then most people will have little problem with it.

The problem is that the tax legislation needs to differentiate between capital acquisitions and the benefits that will derive from them. The state should recognise that enabling a family to be housed, thereby sparing social housing and welfare resources, is a net benefit to the state in the long run and it should be facilitated.

In what way is it prohibitive? You can get €225,000 tax free from your parents in your lifetime. You can also get €6,000 per annum tax free form your parents (3K each) which does not count towards the lifetime limit of €225,000. This has nothing to do with social housing but alot to do with individuals who are coming into large amounts of money/assets but still do not want to pay their fair share of tax.

murphaph

Pawwed Rig wrote: »

In what way is it prohibitive? You can get €225,000 tax free from your parents in your lifetime. You can also get €6,000 per annum tax free form your parents (3K each) which does not count towards the lifetime limit of €225,000. This has nothing to do with social housing but alot to do with individuals who are coming into large amounts of money/assets but still do not want to pay their fair share of tax.

To be honest I think Irish CAT rates are punitive and not actually fair at all.

You get an allowance up to a set point (though if an only child say working and renting in Galway inherited his parents' former home in Dublin it would likely be over the threshold and tax would be due. Should a child not be allowed to inherit a single dwelling in an average Dublin suburb that his parents left behind, without facing a tax bill? I think so.) but after you go beyond that point the tax is a flat 33% which is pretty excruciating. Why is it not progressive, increasing in steps from say 5% up to 50%. This is how it works here in Germany anyway.

ZeroThreat

murphaph wrote: »

To be honest I think Irish CAT rates are punitive and not actually fair at all.

You get an allowance up to a set point (though if an only child say working and renting in Galway inherited his parents' former home in Dublin it would likely be over the threshold and tax would be due. Should a child not be allowed to inherit a single dwelling in an average Dublin suburb that his parents left behind, without facing a tax bill? I think so.) but after you go beyond that point the tax is a flat 33% which is pretty excruciating. Why is it not progressive, increasing in steps from say 5% up to 50%. This is how it works here in Germany anyway.

Have to agree with the above. The main problems are that the lifetime limit is far too low in this day and age and (unintentionally) discriminates largely against urban dwellers, while the actual rate is too high, bringing it back to 15 or 20% would be 'fairer' imho. Love how all the lefties here bang on about people not paying their 'fair' share and complaining that there's not enough tax being farmed from the little people to waste on more public sector wastage, quangos and golden pensions. :mad:

Mrs OBumble

I totally agree that the rate is too high and the limit is too low.

But I don't agree with individual avoidance as the mechanism for protesting about this.

Oh - and marathonic's post is pretty much spot on, except that Revenue do very few random audits. Targeting is a wonderful thing, and far more likely to yield results.

murphaph

The lifetime limits were slashed following the crisis, but property prices have rebounded significantly and yet the thresholds have not been adjusted back upwards. It is 225k now from a parent. It was 525k before the crisis began!!

Pawwed Rig

Mrs OBumble wrote: »

I totally agree that the rate is too high and the limit is too low.

I disagree. I think CAT/inheritance is one of the fairest taxes out there. It taxes people on income/assets that they never lifted a finger to earn. There are enough exemptions and reliefs available in addition to the lifetime limits to aid people who would genuinely be put out (see dwelling house exemption). It is really a tax on the wealthy whereas imo people should be encouraged to work for their wealth rather than sit back and reap the rewards their parents sewed. That is a different argument.

At the end of the day where a parent gives a child money for their mortgage there are simple ways to structure it so as the limits are not affected. This will only affect people who have no concept of forward planning.

For example
Mammy gives Junior €3,000 in December and another €3,000 in January.
Daddy does the same thing. There we have €12,000 tax free already that does not affect the lifetime limits.
If Juniors wife does the same thing then the couple has €24,000 towards their deposit.
A couple of 'gifts' from siblings will soon bring that total upto €40-50K

marathonic

Pawwed Rig wrote: »

For example
Mammy gives Junior €3,000 in December and another €3,000 in January.
Daddy does the same thing. There we have €12,000 tax free already that does not affect the lifetime limits.
If Juniors wife does the same thing then the couple has €24,000 towards their profit.
A couple of 'gifts' from siblings will soon bring that total upto €40-50K

Is the €3,000 limit not an overall limit as opposed to a limit to be received from each gift donor as you describe above?

ct5amr2ig1nfhp

I would disagree. I believe that inheritance tax is grossly unfair, in particular at the current rates. In most cases this money has already been taxed. And now we are now burdened with a property tax.

So to sum up, - I pay income tax, <insert various other taxes, VAT etc.> and in the future, inheritance tax and you think that is fair?

Edit: I should add, that in a lot of cases children have lost their family homes as they are unable to pay the inheritance tax. How can anyone believe this is a fair tax?
If our government had any sense or forward thinking they would relax the inheritance tax, allowing a vast amount of savings held by parents to be passed to their children. i.e. get the younger generation spending and stimulate the economy.

Grandpa Hassan

marathonic wrote: »

Is the €3,000 limit not an overall limit as opposed to a limit to be received from each gift donor as you describe above?

No. It is per donor (parents and grandparents I guess) giving per year. Also, if it is paid into a savings account, it is the year that the deposits are made, not the year they are withdrawn, that counts. So 2 parents paying 3k per year into a fund will allow the child to withdraw the 30k after 5 years tax free as is within the allowance.

Like pawwed rig said, a little forward planning gets around the revenue

ted1

Pawwed Rig wrote: »

I disagree. I think CAT/inheritance is one of the fairest taxes out there. It taxes people on income/assets that they never lifted a finger to earn. There are enough exemptions and reliefs available in addition to the lifetime limits to aid people who would genuinely be put out (see dwelling house exemption).

The word begrudger comes to mind.

It is far from fair, it's complete double taxation. The parents have already bring taxed on the income.

Grandpa Hassan

ted1 wrote: »

The word begrudger comes to mind.

It is far from fair, it's complete double taxation. The parents have already bring taxed on the income.

Agreed. Is an unfair tax, as tax has been paid already. Any unearned wealth such as property price increases captured by CGT. It disincentivises me from working hard to make savings to invest in my family's future.

Pawwed Rig

ted1 wrote: »

The word begrudger comes to mind.

It is far from fair, it's complete double taxation. The parents have already bring taxed on the income.

Calm down chief. It is an opinion that is backed up by points. Try and do the same rather than name calling.

We get double taxed all over the place. Your Income is paid to you after corporation tax. You are charged VAT your income after income tax. You pay stamp duty after tax and on top of VAT in some cases. You pay USC on the same income as IT and PRSI therefore triple taxation. You pay VRT on top of VAT etc etc etc
Without double taxation the country would be bankrupt

ZeroThreat

Pawwed Rig wrote: »

Calm down chief. It is an opinion that is backed up by points. Try and do the same rather than name calling.

We get double taxed all over the place. Your Income is paid to you after corporation tax. You are charged VAT your income after income tax. You pay stamp duty after tax and on top of VAT in some cases. You pay USC on the same income as IT and PRSI therefore triple taxation. You pay VRT on top of VAT etc etc etc
Without double taxation the country would be bankrupt

There wouldn't be a need for such a heavy tax burden if an axe were taken to the numerous special public sector interest groups and crony quangos.

Michael D Not Higgins

ZeroThreat wrote: »

There wouldn't be a need for such a heavy tax burden if an axe were taken to the numerous special public sector interest groups and crony quangos.

Let's not get off topic about public spending, the fact is that so-called double taxation is present in lots of places. What inheritance tax does is limit wealth hoarding within families. Whether the limits and rates are fair is more of a salient point.

Pawwed Rig

Michael D Not Higgins wrote: »

Let's not get off topic about public spending, the fact is that so-called double taxation is present in lots of places. What inheritance tax does is limit wealth hoarding within families. Whether the limits and rates are fair is more of a salient point.

Agreed.

Let me throw a question out.
Is it fairer to be taxed heavily on income that you worked hard to earn while getting no tax on income that you did nothing to get

OR

Is it better to encourage hard work by having lower income tax but higher tax on unearned income.

I know which one I would prefer

Grandpa Hassan

Pawwed Rig wrote: »

Agreed.

Let me throw a question out.
Is it fairer to be taxed heavily on income that you worked hard to earn while getting no tax on income that you did nothing to get

OR

Is it better to encourage hard work by having lower income tax but higher tax on unearned income.

I know which one I would prefer

too simplistic. How does it encourage hard work when you have the prospect of being taxed again, heavily, when you come to provide for your family's future. I work to better my family's lot in life....to give my kids a leg up.

Wealth that is truly unearned is taxed through CGT

Akrasia

Mrs OBumble wrote: »

Which pretty much proves my point: cash transfers between family members are considered as gifts, not loans, for the purposes of deposits - and by Revenue.

People cannot get out of their gift-related tax obligations by claiming "it was a loan".

What if it actually is a loan? And what if the banks are not involved at all, eg, A A Parent has life savings and her son wants to buy a house but does not qualify for a mortgage due to the new deposit rules

Lets say the house is a modest 80k and the parent lends 70k to the son and the son pays the parent back the full amount plus, lets say 3% APR over 10 to 15 years.

How would revenue treat this? It's not a gift, it's a loan, and the loan repayments from the son to the parent are not income for the payment other than the interest portion...

The_Morrigan

Folks, you're beginning to veer off topic.