Freelance income shuts son out of mortgage market

Can you please advise if it's possible for us to help our son out with purchasing a home? He is married with one child, works freelance in the film industry and, as such, is finding it very difficult to get a mortgage, owing to his line of work not being regular. We can get €100,000 together and also my brother can loan him €100,000 to put towards the purchase.

Can we give him this money without any tax implications – as a gift, perhaps, out of his life inheritance amount? Any help you can give us will be appreciated – our son and his family currently live with us.

Ms C.H., email

This is a really difficult predicament in which more and more people are finding themselves. Not only are prices rising at double-digit pace (and much more rapidly than those in certain areas if anecdotal evidence is to be believed) but a growing segment of the population is effectively shut out of the market by virtue of their work status.

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In the past decade, securing a permanent job has become increasingly difficult. The crash meant people were letting go, not hiring and, since then, increasingly flexible work arrangements are cropping up as employers look to avoid getting locked into fixed costs. And that’s even before you look at the so-called gig economy. We may, if Goodbody economist Dermot O’Leary is to be believed, be approaching full employment, but that is not the same as saying people are fully employed. They may have work but much of it is occasional or part-time in nature.

Of course, in the film industry, freelance, project-based employment has long been the norm.

The problem is that our banks – deeply scarred by the crash – are still very cautious in their lending and, in any case, have done nothing to adapt their products to the reality of part-time or freelance work.

So where does that leave you? Well, yes, as parents, you can gift him €100,000 or indeed anything up to €310,000 over this lifetime without him having to pay tax.

As it is a lifetime limit, any other gift over the small gift exemption level of €3,000 that he has already received from either parent would also have to be deducted from the lifetime cap before seeing what scope remains. The same is true of inheritances but, from your letter, I gather both this young man’s parents are alive.

I often hear people being reluctant to consider this sort of thing, arguing that it eats into any inheritance they ultimately wish to leave their child. But, frankly, what is the point of saving everything for some future inheritance when the man and his family need some financial support now?

By the time inheritance comes around, he may not need it or, worse, the stress of not having their own place and having to live with parents and in-laws could put the family under intolerable stress, leading possibly to it falling apart.

So, personally, in a position like this, and for those people in a position to afford to do so, I’d be in favour of a helping hand now rather than a promise for later.

The situation in relation to your brother is slightly more complicated. If it were a gift or inheritance, the amount he could give without landing your son with a tax bill is currently €30,150.

But a loan is fine. The key thing, from Revenue/tax point of view, is that your brother must be charging a market rate of interest. If he offers a low or discounted interest rate then it would be seen that your son was getting a tax benefit – and again it would count as a gift. That’s okay up to a level of €3,000 a year from your brother but, beyond that, it would chip away at his lifetime limit receivable from Category B relatives – ie grandparents, siblings or aunts and uncles.

Anyway, that shouldn’t be a problem as I gather from your mail that your son’s problem is not repaying a loan but getting it in the first place.

You also allude to avoiding the loan altogether by getting your brother to gift you and then passing it on to your son as part of your parental limit. That’s fine as far as it goes but you would only be able to receive the category B threshold – €30,150 – from your brother before you too face a tax bill.

Finally, you raise the scenario of your brother gifting €30,000 to each of your son and his wife. With your son, that’s fine, but his wife, notwithstanding the close family relationship, is considered a stranger by Revenue to you and to your brother. Blood relationships are all that count, not relationships by marriage.

That leaves her in category C and able to receive only €15,075 from your brother before she too faces a tax bill. And again, all these thresholds are lifetime ones. Anything previously received within each category must be deducted from the threshold before you can see what is available without incurring a tax bill.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.