Filing obligations for specified loans received from close relatives

Specified loans

Following on from a previous article written in October 2021, the Finance Bill initiated amendments to the free use of property legislation changing how the benefit arising on a loan from a family member would be calculated. However, this was never implemented. When the decision was made to not proceed with the amendment, it was clear that an amendment would be reconsidered in the future.

Now, with effect from 1 January 2024, the tax rules have been amended to account for a new mandatory filing obligation if you receive a gift in respect of a specified loan from close relatives.

What is a specified loan?

A specified loan is any loan, advance or any form of credit that is:

• received by you from a close relative (generally, a close relative is a person who falls under the Group A or Group B gift tax-free threshold category, e.g. any blood relative, parents, grandparents, siblings, aunt, uncle).
• received by you from a company of which a close relative is a beneficial owner.
• made to a company of which you are a beneficial owner by a close relative.
• made between two companies where you are a beneficial owner of the borrowing company and a close relative is a beneficial owner of the lending company.

Filing obligations

An individual is required to file a CAT return where all the below conditions are met:

• The individual is deemed to have taken a gift for CAT purposes in respect of a specified loan.
• No interest was paid in respect of the specified loan within six months of the end of the relevant period in which the gift is deemed to have been received.
• The combined balance of the loan and any other specified loan exceeds €335,000 in the year.

As it is deemed an individual to have received the benefit on 31 December each year, the CAT return would need to be filed no later than 31 October in the following year. Therefore, the first mandatory filing date will be 31 October 2025.

If you are required to file a CAT return, you will have to include the following information:

• The name, address and tax reference number of the person you received the loan from.
• The balance outstanding on the loan.

Conclusion

Careful consideration must be given when receiving a loan from a close relative to ensure that any arising filing obligations have been met.

The timing of the interest payments must be looked at closely as interest needs to be paid in each relevant period so as not to be reportable in respect of that particular period.

It is important to remember that all specific loans, whether received from the same close relative or multiple close relatives, must be aggregated when considering whether the threshold amount of €335,000 has been exceeded or not. Where the loan balance exceeds €335,000 at any time within the relevant period, a reporting obligation arises.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars private client team below:

March 2024