Wow, what a morning out there! That's wet rain in its truest sense. A flock of wet seagulls were stuck to the balcony window this morning. They had that look of disappointment. Knowing they made a mistake coming back from their holidays in Africa too early. It's week 11 now without a haircut. My locks are now the size of my usual hair. The rest of it is gone so high and thick I won't need a pillow in bed soon. The choice is leave it as is or let my 15-year-old son take revenge on me with hedge clippers. I will persevere but once a hat no longer fits on my head it will be time to take drastic action.
Last week we followed Larry and the expensive lessons he learned selling his assets. In case you missed it Read here
I was on an excellent Omnipro course earlier this week about Revenue Interventions. The presenter Paul Murphy of Martin J Kelly was super and so knowledgeable in this area. It got me thinking about what Revenue know about us already. I was cooking dinner for my kids on Wednesday evening and they had The Simpson on in the background. Homer came out with one of his classic quotes that went something like this
"Why do all those things that only happen to stupid people happen to me"
The course and that quote led me to write this. Revenue know a lot and the purpose of this is to give you a flavour of what they know. How they know doesn't matter too much. If Revenue know what you earn and you don't do your bit, then you know they will come calling at some stage. So, don't be like Homer!
Have you got a letting agent looking after your property? If so, your letting agent has to return the rents you earn to Revenue. Your agent must file this return every year as part of their Income or Corporation Tax return. Click here to go to the Revenue site on this section and have a look at the form. As you will see it is very detailed and the information includes your
- address including eircode
- Frequency of payment
- Amount earned in the accounting period
You will see on that section of their site that they also receive information on the rental sector from the
- Residential Tenancy Board
- Department of Social Protection
- Housing Assistance Payment [HAP]
Like the rest of us ordinary Joe Soaps, Revenue also have access to the Internet. They will see the DAFT reports about average rents in an area or city. They will have a good idea of what rents properties are getting in your area from the above sources. If the average rent is €1000 per month and you are returning €500 per month that could interest them.
Have you a mortgage on your rental property? If so, you need to have the tenancy registered with the Residential Tenancies Board Click here to get a deduction for the mortgage interest against your rental income. Not only that but you have to tick a box on your tax return to confirm that you have done this. Revenue have this information at the touch of a button.
They know how many properties you have. You have to pay Local Property Tax [LPT] on your properties. If you have 4 properties you are not living in them all, so the expectation is that you are renting 2 or 3.
Commercial leases and leases of farmland have to go for stamping. So, Revenue know what rent you are getting as the amounts and your tax number are on the stamp duty forms.
If you have Airbnb income. although not rental income, you will need to file a tax return to pay what you owe on this. Airbnb will return the income their hosts earn so Revenue know the numbers here too.
Are you Vat registered? If so, you will have to make Vat return to revenue during your accounting period. After the end of your accounting period must file a Vat return of trading details [Vat RTD]. This is a summary of your income and expenses at the different vat rates during the year. For us as an accountancy business, the majority of our sales would be at the standard rate of 23% and 21%. There would be some sales to the UK, Europe, and outside the EU and we would have to classify our net of Vat income in each box. Similarly, you do this with your costs. You confirm the net of vat cost of your inputs at the different rates. In short, you have to tell Revenue
- Your sales for the year and
- Your costs for the year
If you are farming, in most cases, you won't be Vat registered. But Revenue will know what farm payments you get from the Department of Agriculture. This information will be on your pre-populated Tax return. Likewise, in the building trade. When a Principal Contractor pays a subcontractor they declare that payment to Revenue. The Principal has to do this to see what rate of tax they must deduct from the payment. So, Revenue know the total payments you get from Principal contractors. Again, this income and any RCT that you have paid will be on your prepopulated tax return.
Revenue know your income, know your wages costs, and know a lot of what your other expenses are. This gives them a very good idea of the level of profit you should have. They will have in-depth knowledge of various industry sectors and know expected margins.
As taxpayers we have to file these returns. If we don't, we won't get tax clearance which is vital for every business now. Revenue also request that those in business have to file a form 46G. This is a form where you include details of payments you make for services, of more than €6,000, for your trade. Companies also need to file this form. For more information on this form Click here
I am only going to mention two other incomes under this heading;
- Share Options and
- Dividend Income
Employees in multinational companies will often receive shares as part of their package. The type of shares will determine the taxes payable. In some cases, the employees will pay tax through the PAYE system when they get the shares. In other cases, where employees get Share Options, they will have to pay the taxes themselves. See here for the section on shares for employees. If you click on Related Forms this will show you what forms the employer must return to Revenue. You will see the different forms for the different share schemes. If you click into the form RSS1 you will see the level of detail that your employer has to hand over to Revenue. If you receive Share Options, you need to register for Income Tax and file a form 11.
For dividend income, the company paying you the dividend has to file a return. The return is a dividend withholding tax [dwt] return and this must go to Revenue the month after the payment. So, if Glanbia pays you a dividend in May 2021 they will declare that payment to Revenue in June 2021. Information that is on the return would include
- The company name
- The date of the payment
- The gross payment
- The net payment
- The DWT deducted
- The number of shares you own
If you take a dividend from your own company, you will also have to file a DWT return. So, don't forget that this income needs to be on your return. Revenue are looking to introduce real-time reporting into this area. Currently, the rate of DWT is 25% and with real-time reporting, they will know what tax rate you pay. If you pay at 40% then the plan is that they will deduct DWT at that rate. This has gone on the back burner but will resurface when Covid-19 is over.
The above is to give you an example of the types of information that Revenue have. It is not to frighten you. I only want to give you some understanding of what information they have about you. Their systems are as one with all government departments, so they have a pretty good idea of your income. If your business is in a limited company, there is no reason you should be doing anything silly. After all the company tax rate on trading income is 12.5% so why would you bother. If you are paying tax at the higher rate and not declaring or under-declaring income, pay what you owe when you owe it. If you end up paying tax, interest and penalties, you will end up paying a lot more.
Ps The main in the pic is Niall Cody the Chairman of the Revenue Commissioners and brother of Brian!
If you don't want to be like Homer, contact Deirdre on 051396703. She will point you in the right direction or contact us and tell us about how we can help you.