Vol. 384 No. 5
asked the Minister for Finance whether persons such as bank employees who are in receipt of a preferential rate of interest in respect of their home loan mortgage are this year being assessed for benefit-in-kind income tax purposes on the difference between the rate being actually charged and a rate of 12 per cent per annum; and, if so, the reason the amount being charged is not based on the current mortgage interest rate.
61.
asked the Minister for Finance in view of the reduction in interest rates over the past 18 months if he will consider reviewing the legislative provisions relating to the taxation of benefits-in-kind of employees of banks and other financial institutions who obtain loans at a preferential rate; and if he will introduce measures whereby the benefit-in-kind is calculated as the difference between the interest rate actually paid and 10 per cent.
I propose to take Questions Nos. 60 and 61 together.
The Finance Act, 1982 provides for a specified rate of 12 per cent to be used in assessing the benefit-in-kind from loans given by employers to their employees at preferential rates. This rate applies to both mortgage and non-mortgage loans.
Since 1982, the specified rate has been lower than commercial rates charged for non-mortgage personal finance such as term loans. That is still the position.
Commercial mortgage rates have from time to time been above 12 per cent since 1982; they have also stood at less than 12 per cent, as they do at present. However, in the determination of the benefit-in-kind charge on mortgage loans at preferential rates of interest, income tax relief is allowed (subject to the normal conditions attaching to mortgage interest relief) on interest deemed to have been paid under the specified rate system as well as on interest actually paid. This has the effect of substantially mitigating the benefit-in-kind charge.
The tax treatment of preferential loans, including the level of the specified rate, is being reviewed in the context of the budget.
