Corporate Tax

CAT loans from close relatives – mandatory tax filing

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With effect from 1 January 2024 a new mandatory Capital Acquisitions Tax (CAT) reporting obligation is imposed on the recipients of certain loans from close relatives.

This applies irrespective of whether any tax is due or not and is applicable to both new loans made from 1 January as well as existing loans.

This new requirement does not create any new tax liabilities but instead aims to provide Revenue with greater visibility in respect of loans between close relatives where the loans are either interest free or are provided for below market interest rates.

What loans are subject to this new reporting obligation?

A CAT return will be required where:

  • a loan has been made directly or indirectly between close relatives,
  • no interest has been paid or a below market rate of interest has been paid on the loan during the calendar year,
  • no interest has been paid within 6 months of the end of said calendar year, and
  • the total balance outstanding on the loan(s) exceeds €335,000 on at least 1 day in a calendar year.

Who is considered a "close relative"?

A close relative of a person is defined as:

  • a parent of the person,
  • the spouse/ civil partner of a parent of the person,
  • a lineal ancestor of the person,
  • a lineal descendant of the person,
  • a brother or sister of the person,
  • an aunt or uncle of the person, or
  • an aunt or uncle of the spouse/ civil partner of a parent of the person.

What about loans to or from companies?

Loans made to or by private companies (i.e. generally companies that are under the control of 5 or fewer persons) would be looked through for the purposes of determining whether close relatives are deemed to make loans to one another. If someone receives an interest free loan of say €500k from a close relative’s company, the recipient of the loan would be deemed to take the loan from their close relative. As this exceeds the €335k threshold, this loan would be reportable.

What if you have multiple loans from close relatives?

In determining a person’s total loan balance liability, all interest free or below market rate loans from close relatives to a person are aggregated. For example, if a person received interest free loans of €150k from both of their parents and €50k from an uncle’s wholly owned company, they would have a total loan balance of €350k. As this exceeds the €335k threshold, these loans would be reportable.

Recurring obligation

Whether or not a person breaches the €335k threshold would need to be considered in respect of each calendar year.

What must be reported to Revenue?

A CAT return must include the following in respect of reportable loan balances:

  • The name, address and tax reference number of the person who made the loan.
  • The balance outstanding on the loan;
  • Such other information as the Revenue Commissioners may reasonably require.

When must this be reported?

A gift would be deemed to arise at 31 December in a particular year if during the year a person had received any interest free loans or below market rate loans and does not pay interest on these loans by 30 June of the following year. If a person received an interest free loan of €1 million from their mother on 1 January 2024 and does not pay interest on this loan by 30 June 2025, a gift in respect of the interest not charged is deemed to arise on 31 December 2024. Irrespective of whether or not any CAT is payable, a CAT return must be filed with Revenue by the person who received the loan by 31 October 2025.

The first returns will be due for submission by 31 October 2025 in respect of the calendar year ending 31 December 2024.

What is a below market rate of interest?

For the purposes of CAT, a below market rate of interest is a rate of interest that is below the highest rate of return that a lender could reasonably be expected to obtain by investing the funds on deposit instead of lending them. Invariably, we would expect deposit rates to be less than the rates of interest a commercial lender might charge for lending.

Contact us

At Grant Thornton, our dedicated Tax Team has extensive experience in managing CAT compliance requirements for clients. If you would like to discuss managing your return filing obligations in relation to CAT or any succession planning matters, please contact a member of our Tax Team, or your usual Grant Thornton contact.