Your personal finance questions – Will I have to pay tax if I part-fund a home for my partner following her divorce?
Q My partner recently got divorced, and as part of the settlement she has been afforded the marital home, as long as she can demonstrate that she can afford the mortgage. As a result, she has taken out a new mortgage with a major bank, but requires a capital sum of €55,000 to secure the mortgage. I am able to “loan” that amount to her to invest in the property, but are there any tax implications or concerns for either party in doing so? I am not going to be party to the mortgage.
A You can loan your partner the €55,000 needed. However, assuming you are not charging interest on the loan, this will be considered an interest-free loan and this is a benefit which she may need to pay tax on, according to the consumer tax manager with Taxback.com Marian Ryan. The relevant tax date for this benefit is December 31 of each year, until the loan is paid off.
The value of the benefit is the rate of return the funds would generate if they were invested on deposit. In other words, the value of the interest-free element of the loan is deemed to be the highest rate of return you would receive if you had the money on deposit.
Ms Ryan said that if you take the €55,000 mentioned and assume that the market rate of return on deposits is 1.5pc, the taxable value to your partner would be €660 per year until she has fully repaid you the loan.
This would equate to approximately €220 per year in Capital Acquisitions Tax (CAT) that she would need to pay. If the loan is repaid during the year, the date of repayment is used to calculate the value of the gift for that year, she said.
Q My daughter, who is 37, worked for a company for three years between 2010 and 2013 before going to Australia. She now wants to get health insurance again but is having difficulty getting confirmation of this previous cover for the purpose of avoiding the age loadings. Any advice on how to sort this?
A The advice of Dermot Goode of TotalHealthCover.ie is to engage directly with the insurer that provided the cover for the three years. Even though this may have been paid by the employer, the contract existed between the member and the insurer.
Assuming the insurer still has the record, it should give you email or written confirmation that you held cover for this three-year period, which means no age loadings should apply. If your previous insurer no longer exists, your records should be held by the new entity that would have acquired their business, Mr Goode said.
You should check if you still have any payslips or previous policy documentation to prove that the previous cover existed
Irish Life Health holds the records for previous members of Aviva Health and GloHealth, he explained.
Finally, you should check if you still have any payslips or previous policy documentation in your possession to prove that the previous cover existed. Insurers are always looking for new members so they should be happy to provide this information to you.
Q I am a mature student who will qualify this summer. I have previously been self-employed, but used the last few years for study and placement. I am interviewing for a job with a UK company that will allow me work part-time from home. I will be paid in sterling. I also want to start my own business this year, working here in Ireland. Do I register as self-employed, as a sole trader? How do you advise that I manage my tax?
A As you are an Irish resident, you are, and will be, taxable here in Ireland on your worldwide income, according to Marian Ryan of Taxback.com. This means your income from the UK-based company would need to be reported here in Ireland and the relevant taxes paid.
You didn’t mention if the UK company will be deducting taxes from your income and reporting to the UK tax authority, the HMRC, or if you would be working for it on a self-assessed basis. If it is the case that the UK company will deduct taxes from your income, you still need to declare it and report it in Ireland on a tax return, Ms Ryan said.
There is a Double Taxation Agreement in place between Ireland and the UK
However, as there is a Double Taxation Agreement (DTA) in place between Ireland and the UK, your UK tax paid will be taken into account and you will not be double-taxed. Also, when you start your business here in Ireland, you would need to be registered for income tax and file tax returns here in Ireland.
Both your self-employed income from the business and your income from the UK company will need to be reported on the same Form 11 tax return form each year, she added.
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