Loans to family member Tax/revenue implications

gazzaman22

Hello, my sister has a small business, she has her ups and downs and I help her out with loans every so often. I've given her my debit card details to help her pay for things when times are tough. Every so often she might buy supplies that's she needs approx 1,000 every so often.

She always pays me back and all is well there, via bank transfer, this could happen 5 times a year. Could I find my self in trouble with tax or revenue or an audit, or are there any implications for me? I'm a paye worker.

Jim_Hodge

No issues with a couple of thousand a year, even if it wasn't repaid.

Princess Calla

Probably better in the taxation forum than PI.

You're allowed give 3k per year as a gift, tax exempt.

The fact she's paying you back each time brings you back into a neutral territory, I'd have assumed.

So you are not a source of income for her so I don't think it would trigger a tax liability.

Peregrinus

No, you're fine.

Strictly speaking, an interest-free loan to someone is a gift to that person on which they (not you) might have a liability to gift tax.

But the value of the gift is not the amount of the loan; it's the amount of interest you would have earned if you had put the money on deposit instead of lending it to your sister. Which, these days, is tiny.

Suppose you lend your sister €1,000 for two months. You could deposit €1,000 with AIB and get 2% interest which, over two months, would net you about €3.65. You might get slightly higher interest rates by shopping around, but it's not going to change the picture much.

For gift tax purposes, your sister is treated as receiving a gift from you of €3.65. But everyone has a small gifts exemption of €3,000 per year on which they don't have to pay gift tax, so your sister has no gift tax liability.

Calahonda52

https://www.boards.ie/discussion/2058310743/loans-to-family-member-tax-revenue-implications

From her perspective, IFF she has a company, it would be prudent, but not essential, not to have any debt owing to you at her tax year end, makes for easier bookkeeping but given the small amounts involved not a biggy