Revenue to probe use of trusts

AN investigation into the use of trusts and offshore structures by people trying to escape paying tax is to be launched next September.

The Revenue Commissioners’ enquiries will focus on uncovering cases of people who have transferred funds and assets to discretionary trusts or offshore structures, such as foundations, establishments, trusts enterprises and offshore companies.

The Revenue has not placed a figure on how much unpaid taxes it expects to recoup, but it is believed the figure could be substantial.

Revenue will be examining third-party information received from banks, accountants, solicitors, tax practitioners and other financial institutions and financial intermediaries, to ensure people with undeclared tax liabilities comply with their tax obligations.

Paul Walsh of the Investigations and Prosecutions Division at the Revenue said a voluntary disclosure scheme will be available until September 1.

“For those who make a qualifying disclosure, the penalty for underpaid tax will be greatly reduced, their name and the amount paid will not be listed in Iris Oifigiúil and no prosecution will be taken against the individuals concerned,” he said.

However, tax payers who are already under investigation, or who come within certain excluded categories, are barred from making a qualified disclosure.

Under the recent Finance Act, new obligations were put on third-party professionals dealing with tax affairs to report all transfers of property, assets and funds made into offshore trusts since December 2003.

As a result of the legislation, the Revenue will soon begin receiving details of people who have made transfers through trusts over the past five years.

Revenue will also get details of the identities of the non-resident trustees and the dates that the transactions took place.

According to the Institute of Chartered Accountants in Ireland (ICAI), the Revenue probe is structured in the same way as previous investigations into deposit accounts, offshore accounts and single premium insurance policies.

ICAI director of taxation Brian Keegan pointed out that with every successive investigation, the number of people taking up Revenue’s incentives to come forward gets smaller.

“Nearly 15,000 people availed of the offshore assets incentive five years ago. By comparison, the last investigation involving deposit accounts last year brought some 2,000 cases into the net.

“Because of the very specialised nature of this investigation, we’d expect the numbers of tax defaulters to be lower still,” he said.

A full disclosure with all due tax, interest and penalties must be made by October 31.