Vol. 571 No. 4
238 Mr. R. Bruton asked the Minister for Finance the basis on which benefit in kind is currently assessed in respect of preferential loans provided by employers; if he will consider remov ing the obligation to pay benefit-in-kind as has been sought by way of a motion at the SIPTU annual conference; and if he will make a statement on the matter. [22014/03]
As the Deputy is aware, a preferential loan is a loan made to an employee by an employer, directly or indirectly, on which the employee pays no interest or interest at a rate lower than the specified rate. A preferential loan is a benefit-in-kind. An employee in receipt of such a benefit is chargeable to income tax on the difference between the interest actually paid and what that amount would be at specified rates of interest provided for in legislation. The current specified rates of interest are 4.5% in the case of loans qualifying for mortgage interest relief and 11% in all other cases.
Since 1992 the specified rates have been reviewed before each budget to take account of the interest rates trends in the marketplace at that time and any adjustment is made in the subsequent Finance Act. In my last budget I reduced the specified rates on home loans from 5% to 4.5%, and from 12% to 11% in all other cases, which reflected the downward trend in interest rates. As with all taxation matters, these specified rates will be reviewed in the context of preparing for the forthcoming budget.
The position is that, except where exemption is provided, employer-provided benefits are subject to income taxation. From 1 January 2004, such benefits will be brought within PAYE and subject to PRSI and the health levy. This treatment will ensure that, in general, employee remuneration, in whatever form provided, is treated similarly for tax and levy purposes. I have no current plans to amend the status of preferential loans.
