Tax Time Limits Know the crucial dates for you and your clients

Transcription

1 Tax Time Limits Know the crucial dates for you and your clients Thursday 1 December 2011 Presented by Sasha Kerins 1

2 While every effort is made to ensure that the information outlined in these papers is accurate, the Irish Tax Institute and authors can accept no responsibility for loss or distress occasioned to any person acting or refraining from acting as a result of the material published herein. Any views or opinions expressed are not necessarily subscribed to by the Irish Tax Institute. Professional advice should always be sought before acting on any topic covered in these notes. Irish Tax Institute and the crest logo are trademarks of the Irish Tax Institute Irish Tax Institute 2011 unless otherwise stated. All rights reserved. No part of this publication may be reproduced or transmitted in any material form or by any means, including photocopying and recording, without the prior written permission of the copyright holder, application for which should be addressed to the publisher. Such written permission must also be obtained before any part of this publication is stored in any medium by electronic means including in a retrieval system of any nature. 2

3 Tax Time Limits Know the crucial dates for you and your clients Sasha Kerins, ACA AITI Tax Director, Grant Thornton T: (045) E: Grant Thornton International. All rights reserved. Summary of Content Main Tax Deadlines Associated Penalties for Non-Compliance Close Companies and Time Limits Loss Relief Claims and Deadlines R&D Claims Revenue Audits & Appeals Taxes Covered Income Tax Corporation Tax Capital Gains Tax (CGT) Pay As You Earn (PAYE) Value-Added Tax (VAT) Capital Acquisitions Tax (CAT) Stamp Duty 3

4 Income Tax Subject to certain exceptions and exemptions, income tax is chargeable on all income earned by individuals, partnerships and unincorporated bodies. Income Tax Self Assessment Form 11 required: Proprietary director >15% Income from trade/ partnership (Form 46G & Form 1) Other income earned chargeable person non-paye income 50k gross or 3,175 or more net Foreign bank account opened in year/foreign life policies or offshore funds disposed/acquired High income earner (Form RR1) Share options exercised Form 12 PAYE earners paper Income Tax Pay and File System Due on Specified Return Date 31 October 1. Pay Prelim Tax for the current year. 2. Pay any balance of income Tax (IT) due for the previous year. 3. File income tax return for previous year. Extension to mid November for ROS file and payers. 4

5 Income Tax Pay and File System Payment options Cheque non-mandatory e-filers Direct debit EFT non-mandatory e-filers RDI instruction Laser card through ROS Credit card Income Tax Payment of Tax by Credit Card It is now possible to pay tax (excluding domicile levy) to Revenue by Credit Card. Credit Card payments must be made, for the moment, by telephone. It is an acceptable form of payment to qualify for extended ROS payment deadlines. Person must pay a transaction charge of 1.69% of the value of the payment. Income Tax Preliminary Tax To avoid interest charges, the amount of preliminary tax for a tax year must be equal to: a. 90% of your final liability for the tax year. b. 100% of your final liability for the previous tax year. c. 105% of your final liability for the pre-preceding tax year. (This option is only available where preliminary tax is paid by direct debit, and does not apply where liability was nil). 3 v's 8 or more. 5

6 Income Tax Late payment of Preliminary Tax If payment of Preliminary Tax is late, or of an insufficient amount, an interest charge will apply. Interest runs from the date the preliminary tax was due, i.e. 31 October. Since 1-Jul-09 the daily rate of interest is % (annually 7.99%). Income Tax Due Date for Return Under the Self-assessment system you have a legal duty to make a tax return for a year by 31 October in the following year. S1052 TCA 1997 Failure to make a return - 3k and can increase to 4k. Income Tax Mandatory E-Filing From 1-Jun-11 following to be returned & paid electronically: All Trusts & All Partnerships Self-employed subject to high earners restriction Self-employed benefiting from or acquiring Foreign Life Policies, Offshore Funds or other Offshore Products Self-employed claiming property based incentives Penalties for non e-filing s917ea(7) 1,520 each instance 6

7 Income Tax Late Submission of Returns Late submission of tax return will result in a surcharge. For new businesses it only applies from the second filing. Surcharge is: 5% of the tax, up to max of 12,695, if the return is made with 2 months of the filing date. 10% of the tax, up to max of 63,485, where the return is made more than 2 months after the filing date. Income Tax Case I/II Relief for Losses Sections 381 and 382 Must be claimed within 2 years after end of relevant year of assessment, and must be claimed in the following order: Step Step 1 Step 2 Step 3 Step 4 Details Against earned income of individual Against unearned income of individual Against earned income of spouse Against unearned income of spouse Loss can be carried forward against income if same trade no time limit currently Income Tax Case I/II Capital Allowances Current Year capital allowances can increase or create a trading loss. Where a S381 claim is made, a trading loss is used in priority to capital allowances to shelter other income. This preserves the capital allowances for future periods. Capital allowances c/f are used in priority to current year allowances. 7

8 Income Tax Case V Losses Individual can carry a rental loss forward for offset against other future Case V income Rental losses cannot be transferred between spouses Capital allowances on fixtures and furnishings can be offset against an individuals case V income, with the excess c/f against future Case V Income. Income Tax Case V Plant & Industrial Buildings Capital Allowances S305 Excess capital allowances in the current year can be offset as follows: Against the individual s other income in the year. Against spouse s income in the year. Claim within 2 years of end of year of assessment S409 limits the excess capital allowances that can be offset against non-rental income in a tax year to 31,750. Income Tax Changes to Property Capital Allowances Abolition of property tax reliefs delayed - 60 days after economic impact assessment. decision of the government then in power whether to commence and publish economic impact assessment. 8

9 Income Tax Implications of Proposals Capital Allowances cut-off point introduced 7 Years - 1 st 10 years - 1 st 7 years: where tax life > 10 years and < 25 years 7 year period not expired: write-off period 7 years unused allowances claimed over remaining balance of 7 years using formula - discounted by 80% use S23 relief within 10 years of first letting if 10 years expired relief gone Section 23 Relief example Solicitor John has two rental properties and purchased a S23 property at the height of the property boom. 150k S23 relief Property Annual Income Property 1 20,000 Property 2 10,000 S23 Property 5, : tax liability nil 2011: additional taxable profit if proposals implemented = 30,000 and additional tax liability of 15,000 approx ring-fenced S23 relief 145,000 takes 29 years to use but max write-off period is 10 years balance of relief lost ability to fund bank borrowings and pay tax? Income Tax Tax Liabilities on Overseas Investments Overseas Rental Income: Sch D Case III Same computational rules as for Irish rental income Losses forward against other foreign rental income or other Case III income 9

10 Income Tax Offshore Funds Good Offshore Funds (GOF): Regulated collective investment vehicles located in the EU, EEA and OECD treaty countries. Bad Offshore Funds (BOF): Regulated or unregulated funds located in countries other than EU, EEA and OECD countries. Treatment depends on whether or not they are distributing funds. Income Tax Offshore Funds Tax on GOF Distributions: 25% on regular distributions/ 28% on other distributions and exit Tax on BOF Distributions and on exit Marginal income tax rates generally Income Tax Good Offshore Funds - Disadvantages 8 year deemed disposal No relief for losses High tax rate if return not filed on time or not correctly included 10

11 Income Tax Other time limits S980 Error or mistake 4 year time limit for repair from end of year of assessment 2007 amendments pre 31 Dec 11 S865 Repayment claims 4 years S787 Retirement annuity premiums 31 Oct of following year. S1023 Separate assessment 1 Apr in year of assessment S1016 Single assessment year of assessment S886A Retain records min 6 years Capital Gains Tax Capital Gains Tax (CGT) is a tax payable on gains made on the disposals of certain assets, which are generally capital in nature Capital Gains Tax Individuals / Trusts Individuals Form 11/ Form CG1 Trusts Form 1 11

12 Capital Gains Tax Companies Development Land Capital Gains Tax Non-Development Land Corporation Tax Windfall tax 80% gain linked to rezoning disposals post 30 Oct 2009 Capital Gains Tax Date of Disposal General Rule: Date of Disposal = Date of Transfer of Asset. This is normally the date of signing the contract important to know, can lead to cash flow problems. Disposal date important it determines the rate of CGT and due date for tax. Specific rules for disposals under contract and compulsory purchase orders (CPOs). Capital Gains Tax Date of Disposal Conditional Contract (e.g. planning permission) date of disposal is date condition satisfied. Disposal Under CPO Since 4/2/10 - the disposal date is the earlier of: Date compensation received, or At a time immediately before the person s death, if sooner. 12

13 Capital Gains Tax Disposal Periods For CGT payment purposes the tax year is divided in 2 periods: Initial Period 1 January to 30 November (inclusive) Later Period 1 December to 31 December (inclusive) Capital Gains Tax Due Dates for Payment Disposals in the initial period tax is due by the 15 December in the same year. Disposals in the later period tax is due by the 31 January in the following tax year. Capital Gains Tax Interest Same provisions as for Income Tax. Interest at % per day for late payment. 13

14 Capital Gains Tax Specified Return Date Individuals, Trusts and Companies (with development land gains (DLG) must by return by 31 October). Companies with gains other than DLG must file with CT1 by normal CT filing dates. Capital Gains Tax Surcharge for Late Filing Even if CGT payment is on time, there will be a surcharge if the actual return is late. Same as for late filing of Income Tax Returns: 5% tax, up to a max of 12,695, if filed within 2 months of the filing date. 10% tax, up to a max of 63,485, if filed after 2 months of the filing date. Capital Gains Tax - Undue Hardship Cases Covers cases where there is a delay of 18 months+ on signing of conditional contract to completion date. Revenue have power to defer CGT very strict rules. Generally, the time of disposal is the date of making the contract, and not the time the asset is conveyed, as commonly mistakenly assumed. 14

15 Capital Gains Tax - Tax Clearance and Withholding Tax Obligations Obligation on purchaser to withhold 15% of total sales proceeds. Applies to particular assets (S980 (2)) where consideration is over 500,000. Withholding tax payable to revenue within 30 days. Purchaser charged interest if not paid. WHT does not have to be withheld if vendor is resident in State, no CGT is payable, CGT already paid Capital Gains Tax - Main Reliefs Principal Private Residence S604 Qualifying periods, also include Last 12 months of ownership Periods of foreign employment Period of 4 years prevented due to work 2 residences 2 years to elect Retirement relief S598 & S year ownership - qualifying assets 6 year holding period for child Corporation Tax Corporation Tax (CT) is chargeable on all profits (income and gains), wherever arising, of companies resident in the State (with some exceptions), and non-resident companies who trade in the State through a branch or agency. 15

16 Corporation Tax Paying and Filing Obligations Obligations of a company include: Compute and pay preliminary tax by specified date File return with 9 months of end of accounting period (21 st of the 9 th month, or 23 rd if electronic) Pay any balance of tax due when lodging the return. Corporation Tax Mandatory E-Filing From 1-Jun-11 all companies must pay and file CT1 returns electronically. Cheques are no longer accepted, payments must either be from an Revenue Debit Instruction (RDI) or by credit card. Corporation Tax - Small Companies CT Liability in previous accounting period (AP) of < 200,000 Preliminary Tax (PT) Due 21 st (or 23 rd ) day of month 11 of AP/ month preceding final month Balance of Tax Due 21 st (or 23 rd ) of month 9 after AP Prelim Tax must be either 90% of current period, or 100% of prior period 16

17 Corporation Tax - Large Companies CT Liability in previous AP of > 200,000 PT 1 st Instalment due month 6 of AP PT 2 nd Instalment due month 11 of AP Balance of Tax due month 9 after AP Corporation Tax - Large Companies Level of payment required: PT 1 st Instalment lower of 45% of current period liability and 50% liability of prior period. PT 2 nd Instalment amount to bring total payment to 90% of current year liability Balance of liability due on CT1 filing date Corporation Tax - New Companies If estimated CT liability less than 200,000 in 1 st AP will not be required to pay preliminary tax in respect of that 1 st AP Instead, required to pay their final liability at the same time they submit their CT1 (i.e. 9 months after end of AP, subject to 21/23 day rule) 17

18 Corporation Tax - Start Up Exemption S486C 3 year exemption claimed in CT1 Relief extended to new companies set-up in 2011 Trade not previously carried on & not liable to close company surcharge Full exemption if CT < 40,000, Marginal relief 40,000-60,000 Linked to employer's PRSI S882 TCA new companies within 30 days of commencement advise Revenue Corporation Tax - Late Submission of Returns Late filing surcharge If filed within 2 months of deadline surcharge of 5% of tax (max 12,695) If filed more than 2 months late surcharge of 10% of tax (max 63,485) Also, restrictions on loss relief Corporation Tax Loss Restrictions for Late Filing Loss Relief Provision Under 2mths Late Over 2mths Late Excess Case IV or V Capital Allowances 25% 50% Current Year and Carried Back Losses in Excepted Trade 25% 50% Current Year and Carried Back Losses in a Relevant Trade 25% 50% Relevant Trading Losses eligible for value-based loss relief 25% 50% against profits of current and prior year Carried Back and Carried Forward Case V Losses 25% 50% 18

19 Corporation Tax - Loss Restrictions Loss Relief Provision Under 2mths Late Over 2mths Late Group Relief 25% 50% Losses of excepted trade, excess Case IV and Case V capital 25% 50% allowances, excess management expenses and excess nontrade charges on income claimed by way of group relief Relevant trading losses and excess trade charges claimed by 25% 50% way of group relief Relevant trading losses and excess trade charges eligible for 25% 50% value based group relief Maximum aggregate restriction 31, ,715 Corporation Tax Timing Deadline for Trading Loss Relief Claims Relief Carry forward trading losses S396(1) Offset non-relevant trading losses against total profits of current and immediately preceding accounting period S396(2) Offset relevant trading loss against relevant trading income of current and immediately preceding AP S396A Offset relevant trading loss on value basis against relevant corporation tax in current and immediately preceding AP - S396B Time Limit No Limit 2 years from end of AP in which loss incurred 2 years from end of AP in which loss incurred 2 years from end of AP in which loss incurred Corporation Tax Timing Deadline for Trading Loss Relief Claims Relief Terminal Loss Relief S397 Offset relevant trading charges against relevant trading income S243A Offset relevant trading charges on a value basis against relevant corporation tax S243B Offset non-trade charges against total profits S243 Group Relief S429 Time Limit No Limit No Limit No Limit No Limit 2 years from end of surrendering company's AP 19

20 Corporation Tax Other Returns to be filed at the same time Form 46G details of payments for services over 6,000 where no tax has been deducted. Due when CT1 filed. Penalty now 6,000 for non-filing. Return of any interest paid gross interest must exceed 65 to be returnable. Close Companies An Irish resident company under the control of 5 or fewer participators, or under the control of participators who are directors, however many. Legislation to prevent situations where the profits of close companies are accumulated rather than distributed to shareholders, in whose hands the distributions would attract income tax at the higher rate. Close Company Surcharge Surcharge of 20% is payable on the total undistributed investment and rental income of a close company. (Additional CT liability) No surcharge if undistributed income is less than 635. No surcharge if company cannot by law make a distribution e.g. where company has insufficient or negative reserves. 20

21 Avoiding the Close Company Surcharge Need to make distribution of the relevant income during a/c period or within 18months of the end of the AP Worth considering whether tax cost of surcharge compared to tax cost of making distributions: effective rate of surcharge is approx 40% effective rate for individual could be 55% Professional Service Company Surcharge Additional surcharge on income generated by professional service companies. To discourage professionals who would operate as sole trader liable to income tax from incorporating and getting advantage of lower corporation tax rates. 15% surcharge applies to 50% of professional income. 20% surcharge applies to passive income. Close Company Surcharge Dividend Payments Dividend returns & payment of dividend withholding tax (DWT) (20%) by the 14 th of the month following the month the dividend was paid. Electronic filing. Interest for the late payment of DWT is applied at the daily rate of %. S434(3A) election dividends to be disregarded for close company surcharge purposes jointly elect in Forms CT1. 21

22 Close Company Surcharge Director s Loans Director s loan due to close company remains outstanding at time CT1 file Withholding tax 20% on grossed up amount. Paid with corporation tax for that period. Refund claimed once loan repaid 4 year limit. Corporation Tax Research and Development Tax Credit Tax relief in the form of a tax credit is available for R&D expenditure under S766 and S767 This is an incentive to attract high value industries into Ireland Corporation Tax Research and Development Tax Credit Relief for revenue expenditure (salaries, overheads, direct and indirect) and plant/machinery Incremental spend above base year base year fixed as 2003 outsourcing - limit 5% & 10% of qualifying expenditure Ability to reclaim 25% of R&D spend as cash refund, limited to PAYE & CT in prior 10 years Time limit 12 months after the year end 22

23 Corporation Tax Research and Development Tax Credit company incurs R&D spend in 2003 of 100,000 in year ended 31/12/2011 company incurs R&D spend of 600,000 incremental spend 500,000 company has paid 50,000 in CT in preceding accounting period company will not have a CT liability for the next 3 accounting periods Corporation Tax Research and Development Tax Credit R&D Credit available to company 500,000 * 25% = 125,000 utilisation of credit 2011 NIL 2010 Carry back under new rules Tax Paid 50,000 Tax Refund Due 50,000 Credit Utilised 50,000 Amount Carried Forward 75,000 Corporation Tax Research and Development Tax Credit Claim of refund on credit basis % of remaining credit refundable on due date for CT return for 2011 Refund Due 21/09/12 25,000 Balance of credit carried forward 50,000 50% of balance refundable 21/09/13 25,000 Balance refundable 21/09/14 25,000 23

24 Corporation Tax Participation exemption Relief is part of Ireland s holding company regime (applies to domestics as well) CGT exemption for a holding company on a disposal of shares in a subsidiary Parent must hold not less than 5% of the shares Shares must be held for more than one year Subsidiary company must be a trading company or part of trading group Subsidiary cannot derive greater part of its value from Irish land or certain other assets PAYE The Pay As You Earn (PAYE) system is a method of tax deduction under which an employer calculates and deducts any income tax due each time a payment of wages, salary etc. is made to an employee. PAYE Requirement to Register for PAYE/PRSI You must register for PAYE/PRSI if you pay: 8 per week ( 36 a month) or more, to an employee who has only one employment. 2 per week ( 9 a month) or more, to an employee who has more than one employment. Also, a company must register and operate PAYE/PRSI on the pay of directors, even if there are no other employees. 24

25 PAYE Forms P30 employer's monthly/quarterly remittance of PAYE and PRSI contributions. P35 employer's annual declaration of liability for PAYE and PRSI contributions - 14 February. P45 details of a cessation of employment. Form P11D Details of benefits-in-kind (BIKs) to employees. PAYE Monthly P30 Returns The total of: Tax deducted from the pay of all employees, plus Total PRSI contributions. To be remitted within 14 days from the end of the month in which the deductions were made deadline extended to the 23 rd of the month if filing by ROS. PAYE Quarterly P30 Returns If PAYE/PRSI contributions for the year are 30,000 or less, quarterly returns can be made. Tax Period January - March April - June July - September File and Pay Quarterly P30 return and payment by 14 (23 rd ) April Quarterly P30 return and payment by 14 (23 rd ) July Quarterly P30 return and payment by 14 (23 rd ) October October - December Quarterly P30 not required include payment for last quarter with the P35 by 15 February 25

26 PAYE Notification if no tax or PRSI contributions due for month / quarter. Form P30 must still be remitted. Show "nil" in money columns for both PAYE and PRSI. PAYE Interest on Overdue Payments Interest will be charged on any overdue payment at a rate of % for each day or part of day for which the payment is due. PAYE P60 and USC Certificates Form P60 is to be issued to each employee after the end of the year. This is the employee's certificate of Pay, PAYE and PRSI contributions for the year. In 2009 and 2010 Income Levy Certificates also had to be issued, in 2011 this is replaced by the USC Certificate. 26

27 PAYE Mandatory E-Filing From 1 October 2011 all employers with 10 employees or more (if not already required to do so) will be obliged to file the following returns electronically: P30 P35 P45 P46 PAYE Other time limits Share options Form RSS1 Due 31 March after end of tax year Payments on death/injury/disability/statutory redundancy payments within 46 days of end of tax year notify Revenue in writing 4 year time limit for any claims VAT VAT is a tax on consumer spending on goods and services. The cost of VAT is ultimately borne by the final consumer, who is not registered for VAT, and therefore cannot recover the VAT. 27

28 VAT Conditions for VAT charge to arise Following need to be present: A supply of goods or services... For consideration... Where the place of supply is in the state... By a taxable person... Acting as such... VAT Accounting For VAT Generally on a bi-monthly basis. Due on or before the 19 th of the following month (extended to 23 rd if using ROS). VAT Exceptions to Bi-Monthly System Annual liability of less than 3,000 may be permitted by Revenue to submit a return on a 6 monthly basis. Annual liabilities between 3,000 and 14,000 may be permitted by Revenue to submit returns every 4 months. 28

29 VAT Exceptions to Bi-Monthly System Traders in a constant repayment position may be allowed to submit returns on a monthly basis. May be permitted to submit an annual return on condition they set up a DD and pay a reasonable monthly amount towards their final liability. (If shortfall at end of year greater than 20% of final liability interest becomes payable). VAT Annual Return of Trading Details Also required to complete an annual form known as the Return of Trading Details. This is a statistical form which records the net value of goods and services acquired and supplied by the person, broken down by different VAT rates. VAT Interest & Penalties If VAT is not paid interest is charged at a rate of % per day. (10% p.a.). Also, interest at same rate if a refund has been made but either: VAT was not properly refundable. The amount refunded was more than amount that should have been refunded. Fixed penalty of 4,000 for each breach of nonfiling/non-compliance & 3,000 incorrect invoice. 29

30 VAT Penalties for Fraud or Neglect VAT law also provides for penalties for fraud or neglect in regard to furnishing the returns, the keeping of accounts and the use of false invoices or other false documents. The amount of penalty depends on the amount of tax evaded and on whether the evasion was by means of fraud or merely neglect. VAT VIES Used to only apply to traders making intracommunity supply of goods out of Ireland. From 1- Jan-10 also applies to intra-community supplies of services. VAT Information Exchange System (VIES) returns to be supplied on a monthly basis. Due 23 rd month following relevant monthly period. If supplies less than 100k monthly file quarterly Annual filings for lesser amounts also Penalty for non-filing 4,000 VAT INTRASTAT Deals with the movement of goods into Ireland from outside the EU and out of Ireland to other parts of the EU. Where goods dispatched over 635,000 p.a. trader must file detailed monthly intrastat returns. If acquire goods over 191,000 p.a. returns also required. Non-compliance fine 1,265 and 65 for each day persists after conviction. 30

31 VAT Reclaiming VAT & Amendments Claim/ amendment within 4 years of end of the current VAT period. From 1-Jan-10 foreign VAT claims can be made through the Irish Revenue website. Revenue then take the application and submit it to the authorities of the relevant country. Process has had some teething problems, and can take some time to receive refunds. Foreign claims need to be made VAT Mandatory e-filing Mandatory e-filing for VAT includes: Large Cases Division cases Certain Government bodies and state agencies Company's required to produce audited accounts under Companies Act Phase 2 cases effective Jan Capital Acquisitions Tax CAT is a tax payable by the beneficiaries of gifts and inheritances. Charge to CAT when a person becomes beneficially entitled in possession to any benefit. Rate of CAT currently = 25%. 31

32 Capital Acquisitions Tax Date of Gift or Inheritance Date of Gift is the date the gift is made. Date of Inheritance usually the date of death of the person on whose death the benefit is taken. Where disponer dies within 2 years of making disposition the gift becomes an inheritance. Date of the gift is the date of the inheritance. Capital Acquisitions Tax Valuation Date Assets must be valued on valuation date. Valuation important as this determines how much CAT is payable by the beneficiary. For gifts the valuation date is generally the date of the gift. For inheritances the valuation date is often more complex. Capital Acquisitions Tax Valuation Date for Inheritances In these cases valuation date is date of death: A Donatio Mortis Causa e.g. person s dying wish on death bed. Where a power of revocation has not been exercised. Where property passes under operation of law: Death of a joint tenant. Where remainder man takes assets on death of life tenant. 32

33 Capital Acquisitions Tax Valuation Date for Inheritances In other cases the valuation date is generally earliest of: The date the subject matter can be retained for the benefit of the beneficiary. The date it is actually retained for the benefit of the beneficiary. The date it is transferred to the beneficiary. For inheritances in many cases the valuation date is the date of the Grant of Probate. Capital Acquisitions Tax Valuation Date Accelerated or Deferred Valuation Date can be accelerated e.g. if the benefit is transferred or paid to the beneficiary before the date of the Grant of Representation. Valuation Date can also be deferred in cases where there is litigation in the estate. Capital Acquisitions Tax Dwelling House Exemption To qualify the following conditions must be met: Must have lived in the house for the 3 years ending on the transfer date. Must not have any other private residence. Must not dispose of the property for 6 years after the transfer, otherwise there will be a clawback of the relief. 33

34 Capital Acquisitions Tax Reliefs Agricultural Relief Business Relief Favourite Nephew Capital Acquisitions Tax Agricultural Relief Must be a "farmer" at valuation date. At least 80% of gross assets to consist of agricultural property. The relief is a 90% reduction of the full market value of the "agricultural property". Clawback if property disposed of within 6 years and proceeds not reinvested within 1 year. Capital Acquisitions Tax Business Relief Property must be "relevant business property" (e.g. sole trader, partnership, shares) The relief is a 90% reduction in the taxable value. Clawback if property disposed of within 6 years and proceeds not reinvested within 1 year. Agricultural Relief takes precedence over Business Relief. 34

35 Capital Acquisitions Tax Favourite Niece/Nephew If conditions met Group A thresholds will be available in respect of business or agricultural assets. Beneficiary must have worked "substantially on a full-time basis" for the 5 year period ending on the date on which the disponer's interest in the business ceased. Capital Acquisitions Tax Self Assessment Self-assessment CAT declaration made via IT38 return. This is an annual return, hence it includes all gifts or inheritances in the year. Where any relief or exemption is being claimed the IT38 must be filed electronically. Pay by EFT or online via laser card. Paper file must request Form IT38 from Revenue. Capital Acquisitions Tax Pay and File Dates The Finance Act 2011 brought forward the Pay and File date for CAT from 31 October to 30 September. Valuation Date IT38 Pay and File 1 January to 31 August September September to 31 December 30 September e.g. inheritance of house, valuation date 31-Aug- 11, need to pay CAT to Revenue by 30-Sep-11. This can cause problems for a lot of people. 35

36 Capital Acquisitions Tax Surcharge and Interest A similar surcharge to IT and CGT. This is being introduced with the objective to bring CAT into line with other self-assessment taxes. Surcharge of 5% (max 12,695) when less then 2 months late. Surcharge of 10% (max 63,485) when over 2 months late. Interest at % per day. Capital Acquisitions Tax Surcharge for Undervaluation Revenue can impose a surcharge if you understate the value of an asset in your return. MV Declared as % of True Value Surcharge MV declared between 50% and 67% of true value 10% MV declared between 40% and 50% of true value 20% MV declared less than 40% of the true value 30% Capital Acquisitions Tax Discretionary Trust Tax Assets placed in discretionary trusts are subject to: Once off charge of 6%, due within 4 months of the valuation date. Annual charge of 1%, due on 31 Dec each year. 36

37 Stamp Duty Stamp Duty is one of the oldest taxes to survive into modern times. It is not a tax on transactions, but rather a tax on the instruments used to effect a transaction. Stamp Duty 2 Main Categories Category 1 comprises duties payable on a range of instruments used to effect property transactions and commercial transactions. Category 2 comprises duties and levies payable. These duties usually effect banks and insurance companies. Stamp Duty Filing Stamp Duty Returns Filing a return is a statutory requirement. S2(3)SDCA 1999 return and payment must be filed within 30 days if execution. In practice, Revenue will accept a return up to 44 days after execution. Refund can be claimed within 4 years from stamping date. 37

38 Stamp Duty Interest and Penalties Interest and penalties for late or underpaid tax. Must be paid before stamp duty certificate can be issued Daily rate of interest of % Interest runs from the date of the execution of the transaction Interest is charged on the lower of the tax due or the amount of underpaid tax Stamp Duty Interest and Penalties Further penalties on: Any instrument referred to in table of Accountable Persons Any instrument operating as voluntary conveyance Date Stamped After First Execution After 30 days and within 6 months After 6 months and within 12 months After 12 months Surcharge Penalty 10% of unpaid duty 20% of unpaid duty 30% of unpaid duty Stamp Duty Surcharge for Undervaluation Surcharge to be applied where property has been undervalued in the case of voluntary disposition. Percent by which Market Value Understated Relevant Surcharge Greater than 15% but less than 30% 25% Greater than 30% but less than 50% 50% Greater than 50% 100% 38

39 Stamp Duty Relief for Transfers Between Relatives Consanguinity Relief Person acquiring the property must be a blood relative" of the transferor Stamp Duty reduced to 50% of rate applicable Does not apply to transfer of shares or residential property Claim for consanguinity relief must be submitted to Revenue for adjudication Stamp Duty Relief for Transfers of assets S79 SDCA Relief from stamp duty on transfer of assets between associated parties. Must remain associated for a period 2 years post transfer, subject to certain conditions. If not, relief clawed back and interest at % charged from date ceased to be associated. Stamp Duty Mandatory e-filing Required to file and pay all stamp duty returns on line 39

40 Revenue Audits Code of Practice & Penalty Regime Revenue Audits Penalties Penalty regime new legislation FA (No2) 2008 W/E/F defaults from 24 December 2008 Factors affecting quantum of penalty whether default before or after 24/12/08 number of previous qualifying disclosures 5 year rule category of behaviour prompted or unprompted disclosure Revenue Audits Penalties Penalties s1077a-e - If taxpayer and revenue disagree on penalties Revenue opinion issued to taxpayer 30 days to agree opinion in writing and pay Failing payment Revenue make court application, (note: not to Appeal Commissioners) Notices of opinion (very few Cork District) "99% cases settled as before" TALC: "only used in exceptional cases" Legal issues no challenge (yet) 40

41 Revenue Audits Finance Act 2011 Changes Defaults from 1 Jan 2010 publication threshold 33,000 (was 30,000) If liability agreed but not paid Revenue can now publish case right of appeal to Appeal Commissioners remains Attachment orders to employee emoluments Revenue offences use of zappers Revenue Audit Categories of Tax Default BEFORE 24/12/2008 AFTER 24/12/2008 Deliberate default Gross carelessness Deliberate behaviour Careless behaviour with significant consequences Insufficient care Careless behaviour without significant consequences Revenue Audit Code of Practice "Significant Consequences" where tax underpaid >15%. Careless behaviour v deliberate behaviour intent to default Co-operation having all records available prompt responses Qualifying disclosure - 14 days limit to seek 60 day postponement for qualifying disclosure preparation. 41

42 Revenue Audit Code of Practice Penalty Table Category of Default Qualifying Disclosure All defaults where there is qualifying disclosure All qualifying disclosures in this category First qualifying disclosure in these categories Penalty table of defaults that occurred on or after 24/12/2008 Careless behaviour without significant consequences Careless behaviour with significant consequences Prompted qualifying disclosure and cooperation 10% 3% 20% 5% Deliberate behaviour 50% 10% Unprompted qualifying disclosure and cooperation Second qualifying disclosure in these categories Third or subsequent qualifying disclosure in these categories Careless behaviour with 30% 20% significant consequences Deliberate behaviour 75% 55% Careless behaviour with significant consequences 40% 40% Deliberate behaviour 100% 100% Revenue Audit Code of Practice No qualifying disclosure Category of default No co-operation Co-operation All defaults where there is no qualifying disclosure Careless behaviour without significant consequences Careless behaviour with significant consequences Deliberate behaviour 20% 15% * 40% 30% 100% 75% Revenue Audit Publication Provided for by S.1086 TCA 1997 No publication even if penalty determined by court S1086(4)(a) qualifying disclosure S1086(4)(d) penalty not over 15% of tax or S1086 (4)(c)total of tax, interest and penalty not > 30,000 ( 33k post 1 Jan 2010) 42

43 Appeals S993 TCA - taxpayer can appeal an assessment within 30 days of issue. The appeal must be in writing to Revenue. Extensions to 30 day limit in certain cases. Appeals rejected by Revenue taxpayer appeals to Appeal Commissioners within 15 days of notice of refusal. 43