Revenue acting on deposits handed from parents

cpoh1

Akrasia wrote: »

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...

Read the thread...

cpoh1 wrote: »

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.

TheQuietFella

I think it's a little extreme to be honest.

You're helping your child or children in a new life/beginning.

So after paying tax on an income, bank interest they now want to tax a gift to aid your children!


A man I knew that has since departed was a millionaire & I once asked him what he would do regarding

his wealth when he passed on & his answer was that whatever he had was long given!

ted1

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.

No the double taxation is not present in lots of places. it does nothing to prevent wealth hoarding.

ted1

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

People work hard to provide for their family.
Also in many cases the entire family is involved in getting the wealth, helping out in a family buisness, missing parents while they are away on trips. Attending buisness social events, etc,

Akrasia

cpoh1 wrote: »

Read the thread...

Sorry, My scenario was a little bit different. In my scenario, there is no mortgage. The parent lends the full cost of the property. I was wondering what the revenue position on gift tax would be if there was a genuine loan between parent and child that was paid back in full

Does the revenue have a policy of not believing people who say this and then having this affect inheritence tax liability years later?

Grandpa Hassan

cpoh1 wrote: »

Read the thread...

Read the post

CIARAN_BOYLE

Akrasia wrote: »

Sorry, My scenario was a little bit different. In my scenario, there is no mortgage. The parent lends the full cost of the property. I was wondering what the revenue position on gift tax would be if there was a genuine loan between parent and child that was paid back in full

Does the revenue have a policy of not believing people who say this and then having this affect inheritence tax liability years later?

Did the parent declare interest as income?

If so grand if not then either its a gift or Revenue can charge the estate tax, interest and penalties on the unreturned interest income.

Grandpa Hassan

There seems to be an awful lot of begrudgery on this thread about people who have generated some wealth using it for the betterment of their family. Ultimately I think that this is what it comes down to.

There are plenty of ways around this, with a bit of forward planning. €3k a year from both parents into a fund, which can then be given to the child at maturity for a deposit on a house (the tax is on the year the €3k is invested, not when the cumulative total is paid out). So over, say, 5 years there would be €30k available for the child.

We all know that proper wealthy people will have been giving over time.

Michael D Not Higgins

ted1 wrote: »

No the double taxation is not present in lots of places. it does nothing to prevent wealth hoarding.

I'm not going to continue arguing this on the thread due to the mod's instruction.

Claw Hammer

share_bear wrote: »

...but wait a minute Morrigan.

Take the new central bank rules + the revenue issue.

Whats to stop a vendor of a house offering to lend to the prospective purchaser a large deposit, say 40,000 in cash. Loan is satisfied by repayment in cash.

Purchasers then immediately hands cash back to vendor in exchange for a receipt for a non-refundable cash deposit on the property the vendor is selling. This also has the off-balance-sheet effect of satisfying the loan.

Vendor sells to Purchaser, probably at an inflated total value.

P.S. Cash probably never actually leave Vendors hands, its a notional and immediate paper transaction only.

The solicitor stamping the deed as to certify that the transaction is not part of any other transaction or series of transactions. What you are describing would be caught by it People used to do it a few years ago but like everything things have tightened up.

BrianD3

TheQuietFella wrote: »

his wealth when he passed on & his answer was that whatever he had was long given!

It's the "long given" scenarios where people are evading tax. If you inherit assets, probate will often be needed which requires the completion of a CA24 form (Revenue affidavit) by the executor. In my experience, Revenue then write to the beneficiaries reminding them that they may have a CAT liability.

Whereas with gifts of money while the disponer is alive, this doesn't happen and it is up to the beneficiary to make a return if they are liable for CAT. Banks may also have a role by reporting transactions over a certain threshold.

I have no doubt that there are plenty of ignorant people out there who think that because they were given money for a house deposit, car or wedding that that is somehow "different" than a cash gift used for any other purpose or an inheritance.

I've also heard clowns try to use the fact that their house has gone down in value to justify their tax evasion. Eg they receive a gift of 50k towards a house which then halves in value due to the recession, now they don't think this 50k should count as a gift :rolleyes:

Mr. teddywinkles

Akrasia wrote: »

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...

I'd say the parent would be long dead before hed pay it back.

BrianD3

BrianD3 wrote: »

It's the "long given" scenarios where people are evading tax.

Not necessarily. Assuming the money is coming from both parents then each child can receive 6k per year tax free, then they have the 225k tax free threshold also.

If the parents were planning for many years a lot of money could be passed on tax free, point is this should not have to happen and children should be allowed have as much money passed on by their parents as the parents want tax free.

Even if they were passing on money above these limits (in the scenario mentioned by the poster you quoted) they could be say giving it in cash for the children to use day to day while they saved their wages etc, this wouldn't show up on accounts so would never be found out.

Andrew Purfield

BrianD3 wrote: »

I've just read the SBP article. Looks like I've been a mug for the last few years recording and declaring my gifts and paying over 120k in CAT to Revenue so far.

SBP article implies that people have been receiving money for cars and houses and not declaring them, Revenue has been turning a blind eye and it was "acknowledged in the tax industry that there were some things that Revenue wouldn't go after".

Even with this new clampdown, it says in the article that someone that has their wedding funded by a parent will not be liable for CAT. I find this amazing and wrong.

Obviously, gifts for house deposits, car and weddings will generally be well below the current parent to child threshold of 225k but gifts received since 1991 and above 3k eat into this threshold. If someone received substantial gifts from their parents and then received an inheritance from a parent putting them over the threshold, I bet that many will "forget" that they received the gifts.

The threshold seems plain wrong to me.

Why should some people have tax free gifts upto a level of cash most people couldn't even dream of-225K!!!!!

Equally this craic about parents buying gifts and paying for weddings. All that stuff is of financial benefit to a person. Again shows the gap between people in Ireland. Most people pay for a fairly modest wedding and will do well to get any sort of honeymoon...and will often be in debt for the next few years paying it back..

Saw another Property Porn ad in the Examiner today for 600K for a pretty standard Rural house in rural Cork. The same thing in a very nice and scenic part of Louth would cost you maybe 50 grand.

What I'm wondering is if I come back full time in a few years with earnings from working in Asia and I want to buy a cheap enough house as a residence where I'm from(the Drogheda/Dundalk area where houses cost 20-30K atm) will I have to go through receipts for money earned abroad? From what I hear from people on the ground the money in Vietnam is just either cash or straight into a bank/paypal account.

Anybody know the procedure on that-how they assess income you earned abroad on your arrival home? I presume a run down of bank transactions and employer refs suffices?

Anyways if somebody can crib about a 120K tax bill they ain't paying enough tax imo. People of my background would describe a comfortable life as not having to worry about running out of oil for a change next year, being able to afford more than cheap pork and processed foods this week, maybe owning their own home as a residence so they aren't vulnerable to rapacious landlords, having an okay paying job in Dublin and being able to afford the odd holiday. I guess we live on another planet from those who inherit everything or the wallies who get into debt out of greed which is a substantial minority of people who bought in years gone by. We have to work for it and don't benefit from these ridiculously generous thresholds which only benefit the well off. Everything costs money and we couldn't even get an overdraft were we even able to find reliable work at home.

On property generally: Everyone in my part of the village where I'm from-traditional residents and those of us in the council Estate..growing up Our parents were on the dole or earning the minimum wage and across the road you had the Celtic Tiger types in the New Estates. Consequently a lot of people struggled to feel sorry for people in debt when they had always been the underlying poor...Some people just bought an overpriced family home but a lot of people were after the quick buck as well and things like Gift Thresholds are a legacy of breaks for the kids of the middle classes.

Andrew Purfield

Andrew Purfield wrote: »

Anyways if somebody can crib about a 120K tax bill they ain't paying enough tax imo.

One of the most ridiculous statements I've seen in quite a while.

Andrew Purfield wrote: »

ridiculously generous thresholds which only benefit the well off.

the only thing ridiculous about the thresholds is that they are so low, or that gift tax even exists particularly between family members.

Andrew Purfield wrote: »

Those of us in the council estate...growing up Our parents were on the dole.

Free money and free houses provided by the tax payer and you complain about thresholds and an unfair system?

Andrew Purfield

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.

Spot on. Summed up better than I could manage.

Andrew Purfield

ZeroThreat wrote: »

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:

Okay so how many people do you know in this world whose parents can gift them 6 grand a year and 225K for a house?

I don't think I'm unique to having grown up in a poor area. About 60% of people in Ireland earn under the living wage(less than 30K) according to the CSO so most people cannot imagine these allowances being anything but generous.

Andrew Purfield

Elaina Hallowed Rainfall wrote: »

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.

I have paid almost 20% of my wage this year in Austria on a part time Teaching wage of just under 1'400 a month..with net pay at 1140....take away rent and it's a normal part time income of about 200 quid a week..

Now that's income tax for me in the form of a compulsory health and social charge.

Income tax, and social services and consumption taxes etc. etc. in Ireland is all skewed towards the middle classes as we saw in the recent budget where most people earning under a certain amount, who rely most on public services, are 1-2% worse off and people earning over 50K are in net benefit. Indeed many people earning well over 50K, taking the Water charges etc. into account too, are several hundred euro a year better off.

I think a lot of people in Ireland cribbing about income taxes while hospitals collapse and the young have to work abroad most of the year should try living in a European country some time paying what are considerably higher rates. There's a real crass ignorance as to what unfair really is as well.

People cribbing over 120k tax bills was illuminating for me to say the least. When I was homeless and unemployed a Rehab style Hostel profiteering from a jobbridge workforce and charity tax status took 75% of my 100 euro a week and wanted another 10 euros off me as well. I regularly struggled on 25 euros a week to supplement the rations we had and I couldn't get out of there quick enough-luckily family came through for me with a rental deposit loan in the end. I had no Gas or Oil then in the House I was sharing over Xmas....and the Community officer took the piss of me when I asked him for a hardship cheque to buy some fuel..Austria's tax system means unemployed young people in the same situation would get 55% of their former wage...

Thank you for giving me perspective on what's unfair though lads.

lulu1

just last night we were looking a a terraced house for 85k.We were thinking of buying it for our son. Well we would give him the money but the house would be in his name

Would there be any problem there

Andrew Purfield

Grandpa Hassan wrote: »

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

Doesn't everybody 'work hard to benefit their family's future?'

Could you raise a family of five on less than 20K a year as a single parent?

That's what my Father did.

We need to get away from this notion that some people work harder than others and need 'incentives'.

Andrew Purfield

Grandpa Hassan wrote: »

There seems to be an awful lot of begrudgery on this thread about people who have generated some wealth using it for the betterment of their family. Ultimately I think that this is what it comes down to.

There are plenty of ways around this, with a bit of forward planning. €3k a year from both parents into a fund, which can then be given to the child at maturity for a deposit on a house (the tax is on the year the €3k is invested, not when the cumulative total is paid out). So over, say, 5 years there would be €30k available for the child.

We all know that proper wealthy people will have been giving over time.

No the begrudgery is more directed at the disconnect between people who have a head start in life complaining about paying '120K in tax' or only being able to get 6K a year off of Mammy and Daddy and thinking all inheritance should be more or less tax free.

Ultimately an Inheritance Tax is an attempt to lessen the inherent inequality in a property market where there is a mad buying culture among a certain class of Irish society, and where anybody on a lower income looking for a small house is at a disadvantage as a result if this capital goes untaxed.

I think the current law is if anything too generous but Revenue are more than capable at doing their job.

Andrew Purfield

Xzavier Attractive Tollbooth wrote: »

One of the most ridiculous statements I've seen in quite a while.



the only thing ridiculous about the thresholds is that they are so low, or that gift tax even exists particularly between family members.



Free money and free houses provided by the tax payer and you complain about thresholds and an unfair system?

Ha I obviously touched a nerve as you replied by attacking my background.

I am not at all ashamed of it, I'm not proud of it. I don't take any pleasure in begrudgery either.

If it were upto some people there'd be no taxes except for the little people.

Walk down the main street of any provincial town. Visit any working class, or if you like, lower class estate. Talk to people there about 120K tax bills being unfair.

Incidentally we all paid tax when in employment too so less of the arrogance please. The argument here ought to be the fairness/unfairness of the Thresholds and property reliefs here versus the unfairness of everything else.

I knew one Limerick fella here in Austria earlier in the year for a brief period. I'd be the opposite to him on many opinions but his comment that people in Ireland don't like paying for anything is more appropriate in this instance though people of a certain persuasion are always quick to attack the poor in this way they hate paying any sort of tax themselves.

Basically your argument above, taking your insult towards me and the sentiments of the post into account, is all inherited wealth should be free out of fairness but **** the poor.

ZeroThreat

Wow the commie is out in force today.

BTW, the little people SHOULD pay more since they're the ones who drain most resources via social welfare, health, education etc...

It's only the leftie loony AAA/PBP/Paul Murphy types who harp on about 'taxing the rich' as a solution to all our economic woes.

Michael D Not Higgins

lulu1 wrote: »

just last night we were looking a a terraced house for 85k.We were thinking of buying it for our son. Well we would give him the money but the house would be in his name

Would there be any problem there

Possibly a large tax bill. Talk to an accountant before something like that.

The_Conductor

lulu1 wrote: »

just last night we were looking a a terraced house for 85k.We were thinking of buying it for our son. Well we would give him the money but the house would be in his name

Would there be any problem there

No problem.
Keep in mind the 225k limit- is a lifetime limit- so the max your son could inherit from you posthumously would then be 140k.
Revenue are now keep good historical track of these 'gifts' and taxing them appropriately.

The_Conductor

Andrew- you resurrected a thread that had last been posted in- over 3 months previous- and are soapboxing about the Irish tax system- and how you feel it is unfairly geared towards the wealthier section in society.

Read the forum's charter- if you intend to post in this forum again. This is an informal warning- your next one will be formal.

Do not resurrect zombie threads.

Do not soapbox.

If you want to discuss inheritance, tax and the unfairness of the Irish tax system- take it elsewhere- we have a tax forum which would be an entirely appropriate venue- however, I would warn you that soapboxing isn't appreciated over there either.

Thread closed.