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Completing your gift or Inheritance Tax return (IT38)

Filing obligations for certain interest free loans

When is an interest free loan reportable?

If you receive a gift in respect of a specified loan, you may have to file a Capital Acquisitions Tax (CAT) return.

A specified loan is any loan, advance or any form of credit that is:

  • received by you from a close relative
  • received by you from a company of which a close relative is a beneficial owner
  • made by a close relative to a company of which you are a beneficial owner
  • or
  • made between two companies where:
    • you are a beneficial owner of the borrowing company
    • and
    • a close relative is a beneficial owner of the lending company.

Note

A close relative is someone related to you for the purposes of either the Group A or Group B thresholds.

You will have to file a CAT return where:

  • you are deemed to have taken a gift for CAT purposes in respect of a specified loan
  • no interest was paid on the loan within 6 months of the end of the year of that gift
  • and
  • the combined balance on the loan and any other specified loan exceeds €335,000 in the year.

What information will you need to provide

If you have to file a CAT return on receipt of a gift in respect of a specified loan, you include:

  • the name, address and tax reference number of the person you received the loan from
  • and
  • the balance outstanding on the loan.
  • Example

    James receives an interest free loan of €500,000 from his father on 01 January 2024. The best rate of return he could receive from an investment on deposit on this amount is 1.5%. The loan is still outstanding on 31 December 2024 and no interest is paid on the loan within six months of that date.

    Calculate taxable value
    DescriptionValues
    Loan value €500,000
    Multiply by best rate of return 1.5%
    Taxable value €7,500

    For CAT purposes James is deemed to take a gift of €7,500 from his father on 31 December 2024. After allowing for the small gifts exemption of €3,000, the taxable value of the gift is €4,500. This will count towards James' Group A threshold.

    James has not used any of his Group A threshold, so no tax liability arises in relation to the gift. As the taxable value of the gift does not exceed 80% of his Group A threshold, ordinarily he would not be required to file a CAT return.

    However, as the loan comes within the scope of the new reporting requirements, James will be required to file a CAT return for 2024. He will also be required to file a CAT return for each subsequent year that the loan is outstanding and the criteria for reporting are met.

Next: How do you file?

Published: 21 October 2024 Print this page

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