Article on Independent.ie this morning giving detail oh the new BOI chairman really shines a light on the life styles of a certain section of our community.
According to the article Patrick Kennedy had a mortgage of €2,823,000 with BOI and between the period made average monthly mortgage payments of
€1,416 in 2016 and 2017,
€1,500 in 2015
€1,833 in 2014.
These were interest only payment.
During 2013 he had made a payment of €1,135,000 to reduce his mortgage from €3,958,000 to the €2,823,000.
The year prior he had payments of €253,000 ,reducing the amount owed on his mortgage from €4,211,000 to €3,958,000.
First of its shocking that someone who can afford to live in a property valued in the multi millions and can afford to make an annual payment of excess €1,000,000 is making mortgage payments that would be expected of an average income household living in a 3 bed house in an estate in the suburbs.
However, I'm wondering how all of this is treated by revenue. According to the article the repayments on such a loan amount over the period at the advertised rate would be €12,208.55 per month. This represents quiet a difference and I was wondering if he would have been obliged to pay tax on the benefit that he is receiving.
I understand that preferential loan arrangement between an employee and employer is taxable under Section 122 TCA 1997 . He is not yet an employee so would not have been covered by that section. Although, I would expect that there was an advance arrangement that he would assume the role and that there was some sort of agreement in place relating to his employment which predates his assuming the role and that the preferential rate was active during that period.
Does he, or did he, own any shares during the relevant period and could the loan arrangement be considered a distribution of some kind on which DWT and Income tax obligations would have existed? Surely such an arrangement would be captured under Section 130 TCA if it was taking place.
Finally, what about Gift Tax? If it is not a emolument or a distribution would the difference between what a person would normally pay on the loan and what he was paying not amount to a gift to him from the bank?
Does anyone know how arrangements like these are treated? Does the fact that there would have been an employment agreement in place during the period of apparent preferential treatment but before employment begins play a role, or would that be determined by when the agreement came in to place and if loan arrangements adjusted during that period.