Dáil Éireann Debate, Tuesday - 10 July 2018
171. Deputy Michael McGrath asked the Minister for Finance further to Parliamentary Question No. 188 of 29 May 2018, if the loan was not given to an employee or former employee at a preferential interest rate, then for the purposes of a write-down or debt forgiveness, the Revenue Commissioners will not seek to apply section 122 of the Taxes Consolidation Act 1997; and if he will make a statement on the matter. [30329/18]
Amharc ar fhreagraI am informed by Revenue that to assess the implications of Section 122(3) of the Taxes Consolidation Act (TCA) (Section 122(3) TCA)) for any employee or former employee the full portfolio of loans provided to the individual must be examined.
As stated in the reply to Parliamentary Question No. 188 of 29 May 2018, 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.
Once the tax liability in respect of any preferential loans has been accounted for any non-preferential loans advanced may be fully or partially written-off without incurring a tax liability provided the employer can show to the satisfaction of Revenue that the outcome of the write-off would be the same for the employee or ex-employee as it would be for a non-employee customer of the bank.
Where an employee takes out a "non-preferential" loan, and the employee has no other loans from the employer, the only provision of the preferential loan rules which applies is the provision relating to the release or write-off of a loan (namely, section 112(3) TCA 1997). Any release or write-off of such a non-preferential loan will give rise to a tax liability unless the employer can show to the satisfaction of Revenue that the outcome of the write-off would be the same for the employee as it would be for a non-employee customer of the bank.
Where an ex-employee takes out a loan, after leaving employment with his or her employer, and the loan is written off or released in whole or part, the release or write-off will not give rise to a tax liability provided the ex-employee has no preferential loans with the employer.
