Cash gift from parents

montzarella

Hi, quick question...my parents want to give me a gift of cash, about €45k, to help me out. As the amount is under €225k does that mean I wouldn't have to pay tax on it?

I read the revenue website but am still a little unclear and would be grateful for any assistance anyone can provide. Thanks.

ANXIOUS

Draw up a loan agreement that you will pay back the €45k over 8 years. They can gift you €6k a year between them. The extra €3k is a nominal interest. Then you won't have to pay any tax on it and it won't be taken Into account for any future inheritence.

montzarella

I take it Im wrong then, I can only get €3k per parent per year.

If I went the loan agreement route, would I not have to show that I was making repayments to my parents? Is that not going to be messy?

barneystinson

ANXIOUS wrote: »

Draw up a loan agreement that you will pay back the €45k over 8 years. They can gift you €6k a year between them. The extra €3k is a nominal interest. Then you won't have to pay any tax on it and it won't be taken Into account for any future inheritence.

Every so often someone posts a stinker that shows exactly why one should be very wary of getting advice on taxation matters from anonymous randomers in an Internet forum... :rolleyes:

dogsears

barneystinson wrote: »

Every so often someone posts a stinker that shows exactly why one should be very wary of getting advice on taxation matters from anonymous randomers in an Internet forum... :rolleyes:

Agreed, that advice is very bad indeed.

OP - What the €225k threshold means is that your parents can gift you that much over your lifetime without you having a gift tax liability, and in calculating that you can exclude the first €3k received annually from each of them. If you haven't received that much from them (including the value of non-cash gifts e.g. property etc) during your life to date, then you have some of this tax free exemption left. How much depends on what you've received to date and that will in turn determine whether this €45k can be tax free.

You may have enough to go on now, but if you've any doubt at all, go to see someone qualified.

Calahonda52

ANXIOUS wrote: »

Draw up a loan agreement that you will pay back the €45k over 8 years. They can gift you €6k a year between them. The extra €3k is a nominal interest. Then you won't have to pay any tax on it and it won't be taken Into account for any future inheritence.

So what is exactly wrong with this from a tax planning perspective, assuming the cash is there and as long as there is no reference in the loan agreement to the 6k?

Day 1 Parents lend OP 45k over 8 years at ECB plus 0.01%
day 364, parents gift him 6k, which he uses to reduce loan balance by 6k
and so on.

It is not tax evasion but tax planning, based on the current rules.

The loan can be put in the parents wills as an asset and if they die before themed of the 8 years, the remaining balance is either repaid to the estate or taken as part of the inheritance.

barneystinson

Calahonda52 wrote: »

So what is exactly wrong with this from a tax planning perspective, assuming the cash is there and as long as there is no reference in the loan agreement to the 6k?

Day 1 Parents lend OP 45k over 8 years at ECB plus 0.01%
day 364, parents gift him 6k, which he uses to reduce loan balance by 6k
and so on.

It is not tax evasion but tax planning, based on the current rules.

The loan can be put in the parents wills as an asset and if they die before themed of the 8 years, the remaining balance is either repaid to the estate or taken as part of the inheritance.

Well because it's a very transparent scheme to avoid tax, once it reaches the point where I "gift" you 6k so that you can pay me back a "loan" I gave you...

Synode

Calahonda52 wrote: »

It is not tax evasion but tax planning, based on the current rules.
.

It very clearly is tax evasion. The nature of the plan dictates that it has been structured to evade tax

hfallada

barneystinson wrote: »

Well because it's a very transparent scheme to avoid tax, once it reaches the point where I "gift" you 6k so that you can pay me back a "loan" I gave you...

Tax avoidance is legal. Although whether its moral is another story. How is this any different to the tax avoidance with the use of agricultural land? There was some serious tax avoidance with the use of agricultural land, that Revenue just tightened up with.

http://www.revenue.ie/en/tax/cat/leaflets/cat5.html

You could basically receive €3million from your parents without paying any serious tax on it. Totally legal and you didnt even have to be a farmer. Tax avoidance is about using loopholes in the law, that shouldnt exist but do.

OP I suggest you go to a tax advisor and find out what to do.

barneystinson

hfallada wrote: »

Tax avoidance is legal. Although whether its moral is another story. How is this any different to the tax avoidance with the use of agricultural land? There was some serious tax avoidance with the use of agricultural land, that Revenue just tightened up with.

http://www.revenue.ie/en/tax/cat/leaflets/cat5.html

You could basically receive €3million from your parents without paying any serious tax on it. Totally legal and you didnt even have to be a farmer. Tax avoidance is about using loopholes in the law, that shouldnt exist but do.

OP I suggest you go to a tax advisor and find out what to do.

Note my use of the word scheme.

What you describe about agri land is specific reliefs that are intended to be used.

The scheme being proposed here is highly artificial and would run afoul of anti avoidance legislation.

dogsears

Calahonda52 wrote: »

So what is exactly wrong with this from a tax planning perspective, assuming the cash is there and as long as there is no reference in the loan agreement to the 6k?

Day 1 Parents lend OP 45k over 8 years at ECB plus 0.01%
day 364, parents gift him 6k, which he uses to reduce loan balance by 6k
and so on.

It is not tax evasion but tax planning, based on the current rules.

The loan can be put in the parents wills as an asset and if they die before themed of the 8 years, the remaining balance is either repaid to the estate or taken as part of the inheritance.

It would mean attempting to present as a loan something that is in actual fact intended as a gift. That is a recipe for trouble all day long.

Even if it wasn't for this it is unworkable in practice. It involves the co-operation of a number of people, all of who must buy in to the whole thing - which is most unlikely in my experience, and it needs the discipline to be maintained over a number of years, which is a massively difficult thing to achieve in the real world.

It is also most likely unnecessary where there is unused tax free threshold.

I have seen a very similar scheme suggested a little while ago by a solicitor in relation to a house - though it was more complex because they wanted to use up annual gift allowances of children and grandchildren - after thrashing it about for a bit the principals realised there was no way they could go ahead with it for all the reasons above. They didn't even have thresholds available and ended up paying tax - but they could sleep at night without worrying about a complicated, tax motivated, years lasting, borderline avoidance/evasion scheme

vanman99

Hi, did you ever reach a conclusion on this? My understanding is you can accept up to 225k tax free from parents with the first 3k per year exempt. Did you reach that conclusion?