Kieran Coughlan: Revenue on the hunt for evaders
From a farming perspective, farmers will be fully aware of the on-going co-op shares compliance project which kicked off last October in relation to the Kerry Co-op patronage share scheme.
That particular compliance project is in somewhat of a state of suspension, pending the outcome of a test case expected to be brought before the Tax Appeals Commission.
The issue at hand ultimately boils down to whether the receipt of shares by farmers was to be taken into account as trading income of the farmer, or should the shares be considered as a capital gain.
Many Kerry farmers are waiting anxiously for the outcome of the appeal expected to take place later this summer, but farmers who are members of other major co-ops who have been in receipt of “free” shares are concerned that if the appeal fails, Revenue will widen the scope of their project, with a view to collecting additional income tax.
Revenue have effectively put all farmers on notice through their E-Brief 94/16 that, in their opinion, patronage shares should be included as part of their income tax returns, and farmers are “invited” to review their tax returns, with a view to correcting their income disclosures, to include such patronage shares.
In the vast majority of cases, farmers are holding tough for the appeal commission determination before taking action.
In addition to the share compliance project, a separate major compliance project is currently underway in relation to off-shore accounts and assets.
Where a tax payer has evaded tax, and the evasion is linked to foreign income, foreign gains, foreign assets or foreign bank accounts, then such a person will, with effect from May 1, 2017, not be entitled to the benefits available should a subsequent qualifying disclosure be made.
In effect, the new regime means that persons who have evaded tax involving of any of the above mentioned scenarios will be subject to much more severe penalties.
According to Revenue, there “is now an opportunity to make a disclosure under the current disclosure regime, and avail of reduced penalties and non-publication”.
Where a taxpayer has a foreign bank account, this in of itself does not require a disclosure to Revenue, assuming that the source of the income was either taxed in Ireland or exempt from tax in Ireland, and that the interest earned from such an account was declared in Ireland.
In effect, taxpayers need only consider making a disclosure where there is a liability to tax in Ireland.
The disclosure, together with a calculation of the tax due, interest and penalties should be submitted to Revenue prior to May 1, where a taxpayer wishes to avail of the current reduced penalty rate regime.
The move to close down the qualifying disclosure regime is thought to be targeted at flushing out tax evaders who have been using offshore accounts to hide earnings; Irish residents in receipt of undeclared foreign pension income; and persons who have been using un-taxed monies to buy assets abroad.
