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Tax on peronal loan to a friend

  • 31-01-2011 3:45pm
    #1
    julgin
    Closed Accounts Posts: 11 ✭


    I'm aware of the gift tax but what are the taxation laws on lending a large sum of money (approx. 50k) to a friend?


Comments

  • #2
    Mr. Incognito
    Registered Users, Registered Users 2 Posts: 9,798 ✭✭✭Mr. Incognito


    Well regardless of the tax position make sure you have a written record of the transaction.

    Presuming both parties are Irish then Group C threshold applies for CAT but as it is a loan and not a gift no CAT will apply.


  • #3
    barneystinson
    Registered Users, Registered Users 2 Posts: 4,685 ✭✭✭barneystinson


    julgin wrote: »
    I'm aware of the gift tax but what are the taxation laws on lending a large sum of money (approx. 50k) to a friend?

    No gift tax issues, unless at some point it becomes a gift.
    Only other potential tax liability is if they pay it back to you with interest, then you owe income tax on the interest.

    And as regards gift tax, I would say in the absence of either repayments or some kind of binding written agreement, Revenue would be sceptical about whether it was a loan at all...


  • #4
    julgin
    Closed Accounts Posts: 11 ✭julgin


    There would be no interest paid on the loan.

    Prior to giving the loan would I need to inform the Revenue office?


  • #5
    Mr. Presentable
    Closed Accounts Posts: 9,496 ✭✭✭Mr. Presentable


    At what point does it become a gift, though? What if I win the lotto and "loan" my brother 100k and allow him to default on repaying it?


  • #6
    barneystinson
    Registered Users, Registered Users 2 Posts: 4,685 ✭✭✭barneystinson


    Mr. Presentable wrote: »
    At what point does it become a gift, though? What if I win the lotto and "loan" my brother 100k and allow him to default on repaying it?

    It becomes a gift at the point where you "allow him to default" I suppose!

    As to how the hell that can be proven, well that's the real question, but again, in the absence of anything binding in writing, and if a good bit of time has passed, then the facts would argue it's a gift...


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  • #7
    barneystinson
    Registered Users, Registered Users 2 Posts: 4,685 ✭✭✭barneystinson


    julgin wrote: »
    There would be no interest paid on the loan.

    Prior to giving the loan would I need to inform the Revenue office?

    No, since it's not a taxable transaction there's nothing for you to inform them of.

    On a separate issue, how're ya fixed for a loan...?? :p


  • #8
    julgin
    Closed Accounts Posts: 11 ✭julgin


    barneystinson wrote: »
    No, since it's not a taxable transaction there's nothing for you to inform them of.

    On a separate issue, how're ya fixed for a loan...?? :p

    Haha


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