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Buying house with Employer help

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  • 23-09-2014 10:11pm
    #1
    engrost
    Registered Users Posts: 3 ✭


    Hi,

    I'm in position that company I work in wants to help me with deposit needed to by house.
    I have half of deposit in my savings now. Employer can provide rest, and reduce my salary to repay it over longer time.
    Is there smart way my company can give me this lump sum, so That I won't have to pay 41% tax on it?
    Basically it looks that if company gives me 10k I will only get 6k but still have to repay 10k back.
    Is there a legal way to avoid it?
    Tagged:


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    #2
    niallb
    Registered Users Posts: 2,728 ✭✭✭niallb


    Sounds like you haven't talked to a tax accountant about this one yet.
    You should talk to your company's accounts department. If this is on the table, they may well have done it before.
    You should also get independent advice, and the solicitor handling the house purchase for you should be able to put you in touch with a tax consultant if it's complicated.

    I'm not a tax practitioner, but have recently received help in buying a house, and am aware that those last bits of finance can be very expensive.
    If you're with the employer for a few years could you consider taking out a loan through a bank with the employer as guarantor?
    If you have a contract drawn up for your repayments, there's every chance it would not be treated as income as you are not making a permanent gain.

    It's also likely that the level of tax implication would be more closely related to the standard interest rate you'd pay on a loan elsewhere than to income tax rates.
    You'll be paying back the €10,000 anyway, so your benefit is just the interest on the loan that you haven't paid rather than the principal amount.

    Is that 10k figure crudely the actual amount in question? How long are you expecting to have to pay back the money?


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    #3
    bmwguy
    Closed Accounts Posts: 2,006 ✭✭✭bmwguy


    engrost wrote: »
    Hi,

    I'm in position that company I work in wants to help me with deposit needed to by house.
    I have half of deposit in my savings now. Employer can provide rest, and reduce my salary to repay it over longer time.
    Is there smart way my company can give me this lump sum, so That I won't have to pay 41% tax on it?
    Basically it looks that if company gives me 10k I will only get 6k but still have to repay 10k back.
    Is there a legal way to avoid it?

    Directors can get loans from a company once they pay interest in it comparable to market rates and BIK. Not sure if this is legal for a regular employee. There is nothing stopping them paying you an advance on your wage once tax laws are complied with. If you are on 30k a year they could pay you 15k in January (leaving you enough to pay your deposit out of this) and the other 15k over the remaining 11 months. It would balance out in the end but might leave you short of cash in those months!


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    #4
    bmwguy
    Closed Accounts Posts: 2,006 ✭✭✭bmwguy


    http://www.revenue.ie/en/tax/it/leaflets/benefit-in-kind/loans.html

    Actually it would appear they can loan an employee money. You pay BIK on the difference between the interest rate given and the market rate.


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    #5
    engrost
    Registered Users Posts: 3 ✭engrost


    niallb wrote: »
    Sounds like you haven't talked to a tax accountant about this one yet.
    You should talk to your company's accounts department. If this is on the table, they may well have done it before.
    You should also get independent advice, and the solicitor handling the house purchase for you should be able to put you in touch with a tax consultant if it's complicated.
    No I didn't went yet don't have either solicitor or accountant. Will have to find somebody.
    Never needed one before.
    niallb wrote: »
    Is that 10k figure crudely the actual amount in question? How long are you expecting to have to pay back the money?
    Yes that is pretty close. The company is flexible and not pushy about it. But I don't want to drag it for too long.


    BMWGuy thanks but I heard from banks that This actually can't be a loan.


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    #6
    barneystinson
    Registered Users Posts: 4,683 ✭✭✭barneystinson


    engrost wrote: »
    No I didn't went yet don't have either solicitor or accountant. Will have to find somebody.
    Never needed one before.


    Yes that is pretty close. The company is flexible and not pushy about it. But I don't want to drag it for too long.


    BMWGuy thanks but I heard from banks that This actually can't be a loan.

    Well it's either a loan or it isn't!

    If it isn't a loan then it has to be an an advance of salary and you'll have to pay tax on it, end of.

    If it is a loan then as BMWguy pointed out you only incur a tax on the deemed interest.

    The only way this can work without a big upfront tax bill is by you and your employer lying to the bank, which would be fraud.

    Either way, I don't see how you're going to be able to service the mortgage and pay back your employer, unless you're on such a high salary that 10k net isn't a huge amount to you. In which case you just become a hermit until you've saved that amount and do things properly..!


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    #7
    Immy
    Registered Users Posts: 260 ✭✭Immy


    You will pay BIK on the deemed interest. The interest rate is set down by Revenue as the loan is in relation to your principle private residence the rate is 4.5%. So basically if they loan you 10k then you would have a deemed salary increase of 450 over the year and pay tax on that. The amount would reduce as you pay back loan.


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