Dáil Éireann Debate, Tuesday - 29 May 2018
188. Deputy Michael McGrath asked the Minister for Finance further to Parliamentary Question No. 77 of 1 May 2017, the date the Revenue Commissioners provided guidance to banks on certain benefit-in-kind issues relating to staff and ex-staff of banks here; if he will provide a copy of the advice given to the banks; and if he will make a statement on the matter. [23429/18]
Amharc ar fhreagraI am advised by Revenue that all banks are assigned to the Financial Services (Banking) District in Revenue’s Large Cases Division (LCD).
As I stated in the response to Parliamentary Question No. 77 of 1 May 2017, the legislation concerned, namely, section 122(3) of the Taxes Consolidation Act 1997 (TCA) 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 employment). It is the responsibility of the employer, to identify any benefits to staff to which section 122(3) TCA applies and to compute and pay the tax liability.
I am advised by Revenue that it has provided clarification to banks that section 122(3) TCA applies to all taxpayers, including banks engaged in retail banking that provide loans in the normal course of business. This clarification has been provided on request or discussed at routine meetings held between LCD and the bank. The matter was first discussed with banks during 2013 and guidance provided on the application of section 122(3) at that time.
A number of banks that provide loans to staff and provide loans to third party retail customers have made LCD aware that, in their view, there are cases where the loans to staff may have been advanced on the same terms as to third party customers and that any debt forgiveness is also on the same terms as to third party customers. In these cases, provided that the bank can demonstrate to Revenue’s satisfaction that this is the case then Revenue will review the application of section 122(3). Banks which have advanced this view have been requested to provide documentation on a case by case basis to support their view.
The guidance provided by Revenue to banks is as outlined in the response provided to Parliamentary Question No. 77. 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.
