Tax Administration

Administration

Businesses are obliged to keep and retain records and information relevant to the tax liabilities. They are also obliged to keep and retain linking documents. These are the records which link the primary accounting records to the final accounts.

The Revenue has significant powers to enter premises to inspect documents and records relevant to tax liability. It can inspect both written and electronic documents. It can remove and/or copy documents. The Revenue may use all information and documents to which they have access for the purpose of making tax assessments.

Tax advisors, auditors and certain other persons who obtain information that a company has committed a revenue offence are obliged to notify the company in writing of the offence and require that it notify the Revenue Commissioners. If this is not done, the relevant person must cease to act for the company and must not do so for at least three years. Failure to do so is an offence.

There are agreements between the taxation authorities in various countries relating to the exchange of information. Double taxation agreements deal with the exchange of information between the taxation authorities, as well as double taxation. EU legislation requires member states to exchange information relating to the assessment of certain tax liabilities.

Assessement & Collection

The systems of tax assessment and collection rest primarily on self-assessment and payment of the relevant liability. Individuals and businesses have legal obligations in respect of tax assessment and payment.

The Revenue may make assessments pre-emptively or where they disagree with the taxpayer’s self-assessment. They actively monitor and pursue compliance through desk and field audits.

Failure to comply with tax obligations is a criminal offence. There are numerous obligations, breaches of which constitute offences of varying degrees of potential punishment and penalty. Apart from criminal sanctions, the Revenue charges a penal rate of interest and civil penalties on unpaid and underpaid taxes.

Interest is charged at a specified rate per day on arrears of tax. The level of penalties is often negotiated in the context of settlements following Revenue audits.

Self-assessment

Any person or company which is subject to income, corporation or capital gains tax for a  tax period (calendar year) must make a self-assessment tax return. There is an exception to the obligation where an individual’s income is entirely assessed and taxed by his employer through the PAYE system. The PAYE exclusion does not apply to company directors except for directors of certain non-trading companies.

It is preferable to make a return, even if exempt, so as to ensure that all allowances and credits have been claimed and so that any overpayments are repaid. The obligation to make a self-assessment tax return arises without notice or assessment issued from the Revenue.

In practice, the Revenue issues self-assessment forms to prompt returns. They also issue assessments where they believe there is a liability that is not being declared. They may issue an assessment or an amended assessment on foot of a return of income.

The Finance Act 2011 imposes a penalty of €3,000 on a person who makes a false claim or assists in making a false claim.  Tax wrongly refunded may be recovered from the beneficiary/recipient. The penalty applies to the claimants and agents.

Where there has been any incorrect claim for an allowance, credit deduction relief or repayment, income tax contained in an assessment other than an assessment on a chargeable person or in relation to a balancing statement is due on 1st  July in the year of assessment or 1st January on the following year.

Revenue may determine the tax due and make a determination.  An aggrieved person may appeal. Revenue may raise assessment pursuant to determination, there being an appeal against such an assessment.

Assessment Time Limits

Assessments by Revenue must be made within four years of the end of the relevant tax period. An assessment will only be raised where the self-assessment is not made or is not accepted.

This is provided that a return has been made by the taxpayer, giving a full disclosure of relevant liabilities. If this is not the case, then an assessment may be made at any time whatsoever.  There is no time limit where there has been a failure to disclose the full facts or where there has been fraud.

Finance Act 2023 provides that four-year time limits apply in respect of pay-related employer assessments and refunds.

There is no time limit for the Revenue Commissioners in making or amending an assessment on chargeable persons

• where no return or an incomplete return was filed.
  the person fails to deliver a return for a chargeable period,
• a Revenue officer is not satisfied with the sufficiency of a return delivered by the person having regard to any information received in that regard, or
• a Revenue officer has reasonable grounds for believing that a return delivered by the person does not contain a full and true disclosure of all material facts necessary for the making of an assessment for the chargeable period,

Revenue  may, at any time, make a Revenue assessment on the chargeable person for the chargeable period in such sum as, according to the best of the officer’s judgment, ought to be charged on that person.

Returns

Returns may be made personally or by a tax adviser or agent.  Spouses may male joint returns, effectively being treated as one person, subject to certain conditions.

The tax year is the calendar year. The tax liabilities are assessed with reference to income or gains in the year. An individual’s tax return must be made by 31st October in the year following the year to which the return relates.

The due date for income tax under assessments made on employees or other persons not chargeable to make a return is 30th September instead of 31st October.   These provisions may apply where a person makes a claim for excess credits or reliefs who is not otherwise obliged to make a return.  This may apply for example to a PAYE payer.

In the case of a company, the return must be made by the 21^st day of the ninth month of the accounting period, with reference to which the company is taxed. This includes the further grace period for electronic filing.

Form of Return

The Revenue facilitates and encourages electronic filing of tax returns. The person making the return must be Revenue approved and comply with certain requirements. The Revenue has the power to require electronic returns. In most cases, an electronic return is now mandatory.

Where returns are made electronically, there is an extension to the date for filing that otherwise applies. For example, the 31st October date is usually extended for a further two weeks in the case of electronic filing.

The tax return must contain the information required by Revenue Commissioners. There is a standard printed form of the tax return. Electronic returns are strongly encouraged. Extra time is allowed for an electronic filing. Electronic filing is likely to become increasingly compulsory.

In the case of a partnership, the so-called precedent partner is required to make a partnership return in addition to his or her individual return. There are rules for determining who is a precedent partner.

Incomplete Returns

Where a tax return is made late, certain tax reliefs, including capital allowances, losses and other reliefs and other allowances, are restricted. If the return is less than two months late, the allowances and losses are restricted to 75% of the otherwise allowable amount or the maximum restriction. The maximum restriction is €31,730. In the case of a return of more than two months, the allowances and losses are restricted to 50% or the maximum restriction of €158,715.

A return may be treated as incomplete if it fails to contain the requisite information relevant to the reliefs and allowance in question. In this case, the relevant date is treated as the date of filing a correct return if the matter is not dealt with within a reasonable time of the matter being brought to the taxpayer’s attention.

There are penalties for failure to make returns or for making incomplete or incorrect returns. Penalties are in addition to sums charged as tax and interest. Revenue imposes “civil” penalties without a court order or conviction.

More serious offences may be prosecuted in court. Serious revenue offences are subject to a fine of up to €12,695 and five years imprisonment.  It is also an offence to facilitate serious tax evasion.

Appeals

An appeal can be made against an assessment. However, the assessed tax liability must generally be paid. The grounds of appeal must be set out and outstanding returns must generally be delivered.

Appeals on the specified grounds may be made against assessments raised in the case of failure to deliver unsatisfactory returns only if the return is deliberate and the amount paid on the assessment is at least equal to the liability.  If the assessment was based on part recurrence, but

There is no appeal against a notice of preliminary tax or against items based on accepted details or agreed points.

In the case of a failure to deliver returns or satisfactory returns, an appeal may be made only once the return is delivered, and the amount of outstanding tax on foot of the assessment at least equal to the liability, or the assessment was based on the return. Where an assessment is made before that date for preliminary tax, it is due on the date for preliminary.

Where a preliminary tax has been paid, the balance is payable in the case of companies one month from the date of assessment on the return filing date for accounting periods and for income-tax workers returned to be delivered to buy a first October provided the amount or provided the final liability over the amount paid by 31st of October is no greater than €635  and 5% of tax payable or €3175 if less. The extra tax is due and payable by the 31st of December.

Required Records

The Revenue may require a person to deliver a statement of assets and liabilities. They may see accounts and records. It may seek proof and evidence of income.

The Revenue can obtain information from certain third parties by serving notices. There is an exception concerning confidential, privileged information held by professional advisers. There are special powers to obtain information from banks and insurance companies.

Revenue can require information relevant to the tax liability out of the taxpayer being investigated. If information is not furnished voluntarily, the Revenues can apply to the court to compel the production of the information. More extensive powers require court approval.

Requirements can be made from any trader in relation to payments made to persons other than employees for services rendered. Returns can also be required of representatives, nominees, and trustees. Businesses that make payments over a certain value to third parties and representatives, nominees and trustees are obliged to make certain returns automatically as part of their tax returns.

Third-Party Returns

The following parties must make returns in respect of monies paid to third parties and may have an obligation to withhold tax and pay it as part of their return

• nominee holders of shares and equivalent instruments ;
• persons paying interest to non-residents;
• certain intermediaries who receive payments on behalf of others;
• trustees and nominees;
• managing agents.

The return must be made by 31st  October following the relevant year for individuals.  Revenue may exclude certain persons from the obligation to make the return. Revenue has issued a statement practice regarding the extent to which the information is required to be returned automatically.

Opening Foreign Account

There is an obligation on Irish residents to report the opening of foreign accounts on their annual returns of income. The Finance Act 2023  provides that an individual who does not otherwise have to file a tax return in respect of income tax, CGT, stamp duty or CAT should be excluded from the obligation to report the opening of a foreign account where that account is required to be reported under the OECD Common Reporting Standard (CRS), the EU Directive on Administrative Co-operation (DAC 2), and the US Financial Account Tax Compliance Act (FATCA).

Finance Act 2023 transpose the Directives on Administrative Co-operataion.It clarifies that the powers that are available to an authorised officer of the Revenue Commissioners to make enquiries into the accuracy of a return made, or the failure to make a return, under DAC 6; and to ensure appropriate transposition of DAC 7, as it relates to the new reporting requirements for digital platform operators.

Finance Act 2023 introduces a common legal basis by which EU Member States are obliged to facilitate other Member States in conducting joint audits.

Finance Act 2023  amends provisions which deal with reporting of interest payments by financial institutions, which provide for certain powers that allow an officer of the Revenue Commissioners to gather information from financial institutions and  which gives the Revenue Commissioners a power of attachment of assets such as bank accounts.