It’s make or break time for Kerry Co-op farmers.
Last week, Kerry Co-op updated shareholders and their accountants on the interactions between Kerry Co-op and the Revenue.
There was hope that a test case could be run by agreement with Revenue, the aim being to definitively establish the tax position of share transactions, with an effective hold on open aspect query letters.
However, Revenue’s primary function is to collect taxation due in a timely manner; Revenue are not charged with setting the tax rules, that is a function of the Minister for Finance and the houses of the Oireachtas, through a variety of tax acts.
Revenue must interpret and apply the rules.
In relation to the Kerry shares, Revenue has interpreted the tax rules such that receipt of co-op shares as a consequence of the trading relationship between Kerry Co-op and their milk suppliers warrants an income tax charge.
Where a tax payer disagrees with Revenue’s interpretation of the law, they can appeal to the Tax Appeals Commission, normally within 30 days of an assessment by Revenue against the tax payer.
Revenue have effectively given those farmers who received “aspect query” letters until this Friday to make a voluntary disclosure to Revenue.
It is expected that in the absence of a voluntary disclosure, farmers will get revised notices of assessment for years in question (2011 to 2013, for most).
The message from the Kerry Co-op meeting last week, was that farmers should make an appeal to any such revised assessments within the relevant timeframe.
Farmers should ensure they are fully aware of the implications of settling with Revenue, or going for appeal.
For a start, appealing to the Tax Appeals Commission is not a mechanism for expressing hardship or for arguing about the morality of the tax system. Appeals are a technical examination of the facts, and application of relevant legislation to same.
One key fact not widely known is that to take an appeal in the first instance, a tax payer must have paid the tax and the interest due arising from an assessment.
This seems rather unfair, but presumably this rule exists to prevent bogus appellants simply trying to stall on paying liabilities due.
In relation to the 21-day time period afforded by the Revenue letters, the opportunity for an unprompted disclosure includes a reduced penalty regime. And engaging with Revenue can enable a tax payer to enter an instalment arrangement, with the agreement of Revenue.
So farmers who got the Revenue’s letter face choices. They can accept Revenue’s position, pay their liability by tomorrow, or enter an instalment arrangement by tomorrow, to avail of the reduced penalty regime.
An alternative position is to wait for Revenue’s revised assessments to issue, pay the liabilities demanded in full, and appeal the assessments to the Tax Appeals Commission.
A successful appeal, where Revenue’s interpretation is overruled, could of course quash the assessment, but this could in turn be appealed to the High Court if Revenue disagrees with the Tax Appeals Commission’s determination.
Ignoring Revenue’s correspondence entirely, both the aspect query letter and any subsequent revised assessments, will most likely result in enforcement proceedings, including demand letters, forwarding of the liability for Sheriff collection, or attachment orders on third parties ( where Revenue can demand proceeds of sales are forwarded to them from a tax payer’s trading partners).
Furthermore, ignoring assessments will preclude an appeal, where tax and interest due have not been paid, and the appeal is outside the relevant time frame.
In a statement, the Irish Taxation Institute noted Revenue has confirmed that no taxpayer who engages with them and settles their patronage shares case, pending the determination of any appeal, will be disadvantaged, if the taxpayer is successful at appeal.
So it may be possible for those affected to protect their positions by making a voluntary disclosure but without prejudice to the outcome of an appeal taken by the taxpayer.
As always, get professional taxation advice relevant to your own circumstances.
Chartered tax adviser Kieran Coughlan, Belgooly, Co Cork.
© Irish Examiner Ltd. All rights reserved