Revenue targets hot money inheritances

PEOPLE who inherited money or property from individuals who invested hot money in life assurance products over the last 25 years face massive tax bills under the Revenue’s latest tax crusade.

Revenue is expected to raise anything between €1 billion to €2bn or possibly more as a result of the new investigation. It will be launched on May 23 into undisclosed tax liabilities, which relate to funds invested in life assurance products. It will cover all years from 1980 onwards.

However, tax dodgers or people who inherited funds from people who did not pay their tax on funds invested in life assurance products have until May 23 next to make full disclosures to the Revenue and avoid the severest of penalties.

While the Revenue has said the initial phase of the investigation will focus primarily on those whose aggregate investments of undisclosed funds were €20,000 or greater, all investments should be declared. “If people feel they have a tax liability they should make a voluntary disclosure, irrespective of the amount of money invested,” a Revenue spokeswoman said last night. Tax consultant Adrian Ryan said the last three weeks had been marked by confusion, stand-offs and most of all uncertainty.

“One of the most disturbing elements of the investigation relates to inheritances. Revenue has stated that if prior to his death a deceased person had invested untaxed income in a life assurance product it will seek to recover the attaching tax liability from the beneficiaries of the estate. In effect, Revenue is holding the beneficiaries of an estate responsible for the actions or omissions of the deceased,” he said. Mr Ryan said not only does this appear to be grossly unfair but worries how, in practice, the Revenue proposes to seek recovery - from the executors or the beneficiaries of an inheritance.

“Further questions of fairness arise. If an individual made an investment from untaxed funds it is likely that only they would have been aware of this. So how could the executors make a qualifying disclosure if the only person who was aware of outstanding liabilities is dead? Taken at face value this could result in the ridiculous scenario of the benefits of non-prosecution, non-publication and mitigated penalties being withdrawn from executors who had no knowledge of the non-compliance,” said Mr Ryan, who works with McAvoy & Associates.

Mr Ryan estimates that a tax defaulter who invested £100,000 of undisclosed taxable income in a life assurance product prior to 1990 will have to pay €290,000 to clear their tax debt, penalties and interest to the Revenue. People who inherited money from a tax defaulter will also be liable to pay similar amounts.