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Banking Sector Remuneration

Dáil Éireann Debate, Tuesday - 1 May 2018

Tuesday, 1 May 2018

Ceisteanna (77)

Michael McGrath

Ceist:

77. Deputy Michael McGrath asked the Minister for Finance the position in respect of the ongoing assessment by the Revenue Commissioners of certain benefit-in-kind, BIK, issues relating to staff and ex-staff of banks here; the nature of the BIK issues being assessed; the position in respect of the issue; when he expects the matter to be resolved; and if he will make a statement on the matter. [18573/18]

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Freagraí scríofa

It is assumed that the reference to “certain benefit in kind issues” is a reference to preferential loans to bank employees, including where the employee has left the bank’s employment.

Section 122(3) of the Taxes Consolidation Act (TCA) 1997 provides that where a loan is made by an employer to an employee and the loan, or any interest due on that loan, is written off, in whole or in part, then the amount written off is treated as a taxable benefit in the hands of the employee (or former employee where the employee has left the bank’s employment). It is the responsibility of the bank, as the employer, to identify any benefits to staff to which section 122(3) TCA 1997 applies and to compute and pay the tax liability.

I am informed by Revenue that its approach to the possible application of section 122(3) in the case of loan restructurings, involving the full or partial write-down for an employee or former employee, is that where non-preferential loan(s) are/were originally advanced by a bank to the employee in the normal course of business and the bank can show to Revenue’s satisfaction that the outcome of the write-down would be the same for that employee or former employee as it would be for a non-employee customer of the bank, then no liability to income tax will arise in respect of the write-off of the non-preferential loan(s).

If the employee or former employee has only preferential loans from the bank then section 122(3) TCA 1997 applies to give rise to a tax liability on the full amount written off by the bank.

If there are a number of loans, including preferential loans, then, regardless of the order of the write-off, the amount written off has to be first set against the amount of any preferential loan(s) outstanding and any tax liability arising on the preferential loan(s), so treated as written off first, has to be paid in accordance with section 122(3) TCA 1997.

I am advised by Revenue that it has outlined its approach in this matter to individual banks which have been identified as potentially impacted.

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