The Revenue Commissioners have released the following statement re Capital Acquisitions Tax and debt write off. Basically no CAT liability arises.
Section 5 of the Capital Acquisitions Tax Consolidation Act 2003 provides that a person is deemed to take a gift where, under or in consequence of any disposition, that person becomes beneficially entitled in possession, otherwise than on a death, to any benefit otherwise than for full consideration in money or money’s worth paid by such person.
By virtue of the definition of “disposition” in section 2 (1) CATCA 2003 the release, forfeiture, surrender or abandonment of any debt or benefit, or the failure to exercise a right may be subject to CAT in certain situations.
Where for bona fide commercial reasons, a financial institution enters into a debt restructuring, forgiveness or write-off arrangement with a customer, Revenue’s approach, subject to being satisfied as to the bona fides of the arrangement (which may be subject to Revenue audit or enquiry) is that the financial institution is not intent on making a gift of any sort to the mortgagor/debtor – and accordingly the mortgagor/debtor would not be subject to a CAT charge in respect of any such debt restructuring, forgiveness or write-off arrangement.
This approach will only apply in the above-mentioned circumstances. In particular, should any debt restructuring, forgiveness or write-off arrangement be undertaken for the purposes of the avoidance of tax, the treatment outlined above would not apply.
Have you been refused credit by the banks for loans of up to €250,000?
The Minister for Jobs, Enterprise and Innovation this week announced that the Microfinance Scheme will be open for business from Monday 1st October.
Applications for businesses and sole traders across all sectors employing up to ten people who have been refused credit by the banks for loans of up to €250,000 will be accepted and processed. Criteria, guides and application forms can be found at County and City Enterprise Boards and at www.enterpriseboards.ie
Contact us at Noone Casey for advice on the Microfinance Scheme and how it can benefit you.
The Minister for Jobs, Enterprise and Innovation recently published the Credit Guarantee Bill 2012. The scheme will provide a 75% state guarantee to banks against losses on qualifying loans to firms with growth and job creation potential.Initially, the scheme will facilitate up to €150 million of additional lending a year to SMEs. The cost of the scheme per € 150m of lending is € 6.38m. However, this does not take into account benefits to the exchequer which this lending will bring in terms of increased tax receipts and decreased social welfare payments. When these benefits are taken into account, the net gain is over €25m per €150m of lending. The State will enter into an agreement with each lender and will accredit the lender to participate. The guarantee will be given to each lender for a collection of loans ( a portfolio approach) rather than individually (loan-by- loan-basis). The choice of loans which make up the portfolio is at the discretion of the lender, provided the borrowers meet the eligibility criteria. An Annual portfolio claim limit will be set for the aggregate value of loans for each lender, thereby capping the State’s exposure. Once a lender’s default claims have reached their claim limit, any further losses must be borne by the lender and will not be eligible to be reclaimed from the State. Both the borrower and the bank retain exposure in the event of default. The State is exposed only to the portion of the loan guaranteed up to a pre-specified limit. The period for which the guarantee is provided (as distinct from the term of the loan) is three years. The State Aid framework sets the requirement that a premium must be charged to the borrower in return for the State guarantee. Recipient businesses will be required to pay the Minister (the Guarantor) an annual premium of 2% on the outstanding balance of the loan, assessed and collected annually in advance. A qualifying enterprise must not employ more than 250 persons. There are a number of exclusions including primary production in agriculture, horticulture and fisheries, refinancing of existing debts and overdrafts and property- related activities. The food and drinks sector will be eligible for the Scheme.
AIB has launched a programme of supports aimed at helping startup businesses get off the ground, The supports form part of the bank’s Big Drive for Small Business initiative. Central to the programme is AIB’s Start UP Package which offers a range of incentives to people who open a Business Start up Current Account. These include: free banking for two years, an SME loan with a variable rate of 4.4% and 50% discount off the first years membership to an affiliated participating local Chamber of Commerce.
Word on the street however is that AIB are still not giving out loans to Small or Large Businesses!Looks to us as if AIB are merely going through the marketing motions!
The Credit Review Office received 44 applications from SME’s who have been refused credit by the two pillar banks AIB and Bank of Ireland between March and May of this year. The figures were revealed in a quarterly review of the Credit Review Office by John Trethowan. Trethowan said that while work was still ongoing on a number of cases that of all the cases completed during the three month period, 17 bank refusals were overturned, resulting in the banks supplying €2 million of credit. Since the Office’s establishment in April 2010, 35 per cent of all refusals have been overturned. Any business that has been turned down for a loan application should contact the Credit Review Office at email@example.com