Friday, 6 September 2019

Questions (1876)

Seán Fleming


1876. Deputy Sean Fleming asked the Minister for Employment Affairs and Social Protection further to Parliamentary Question No. 1222 of 7 September 2018, the progress made in respect of the 4% PRSI charge in cases in which there is debt forgiveness in relation to the property of a person in view of the fact that Finance Act 2013 provided for the losses incurred not to be subjected to the income tax rules; when there will be consistency between her Department in respect of the same losses for assessment under PRSI; and if she will make a statement on the matter. [36424/19]

View answer

Written answers (Question to Employment)

The issue to which the Deputy refers is the tax provision applying to the release/forgiveness of a debt relating to land held as trading stock. This provision applies to individuals -

- who own land as part of their trade,

- the value of that land was previously written down, in many cases giving rise to large trading losses, and

- who benefitted from debt forgiveness on borrowings made to purchase that land.

The 2013 tax provision was introduced to ensure that, where loans are taken out to acquire land by individuals engaged actively or otherwise in a trade of dealing in or developing land and these loans are subsequently released or forgiven, the amount forgiven is treated as a receipt of income. The debt forgiveness is accordingly regarded as “reckonable income” for PRSI purposes and is liable to PRSI at the Class S rate of 4%.

While generally PRSI and tax rules are similar, they do differ in terms the treatment of trading losses carried forward from a previous year. Tax is charged after losses brought forward from previous years while PRSI is charged only on the profits generated in a particular year, without regard to losses in prior years. This difference means that the treatment of debt forgiven needs to ensure that it does not give rise to a loss of PRSI income.

My Department is finalising its examination of this issue to ensure the appropriate treatment of debt forgiven for PRSI purposes and will liaise with the all relevant bodies on completion of its deliberations.

I hope this clarifies the matter for the Deputy.

Question No. 1877 answered with Question No. 1868.