Let the taxpayer beware! – Offshore Assets Disclosure
Friday week the 28th April is effectively the last day to have a submission with Revenue on the current Offshore Assets Disclosure. Per Revenue the deadline date is the 30th but as that is a Sunday the Friday before is the last working day. You may remember that Revenue wrote to about 500,000 taxpayers about 6 weeks ago outlining information about self-correction for your 2015 tax return and the deadline of 1 May for undeclared taxes from Offshore Assets.
What is this?
What does this mean for all the hundreds and thousands of ordinary taxpayers? I am sure for the vast vast majority there is no action needed whatsoever as all your tax affairs are up to date but if you have an asset outside the Republic of Ireland then sit up and take note.If you are getting an income from that asset and haven’t returned it in your Income Tax return then you may have an issue. If you used undeclared income to purchase the asset then you certainly have an issue.
Basically if you are resident and domiciled in Ireland then you should be paying tax here on your worldwide Income irrespective of where it is earned. The term residence is quite straightforward and you are tax resident here under a number of rules with the main one being that you are in Ireland for more than 183 days in a year.Domicile is a legal concept and a very brush stroke summary would be that it is the place where you intend to permanently live. The most common types of assets that Revenue are looking at under the current investigation would be property, shares, pensions and offshore funds. Therefore if you have a property outside of Ireland, say in the UK, which you get rental income from and you haven’t returned the rental income to Irish Revenue, then you need to get this sorted out. Similarly if you have UK, European or shares from other countries and you haven’t declared the dividend income, again this is something that needs to be tidied up.Typically a lot of Irish investors have Standard Life, Aviva and Vodafone shares and may be getting income or may have sold these shares. If this is the case and they haven’t returned the income or the sales then they may have an Income Tax or Capital Gains Tax issue. Also you may have a foreign pension, the most common one being a UK pension, and depending on your circumstances and the type of pension it is, then there could be an Irish tax liability.
Per Revenue, they are only interested in people who actually have a tax liability here on undeclared offshore income or gains and they say that they already have a lot of information about offshore accounts and properties purchased abroad. There are a number of different agreements in place that many countries [anyone ever heard of Niue or Nauru] that have signed up to exchange of information agreements. This is effective from 2017 for a lot of countries and many more countries are putting this in place for 2018. The fact that you may have opened an account offshore doesn’t mean you have a tax issue as you may not have any income in the offshore account. Nevertheless in case of any doubt talk to your adviser.
What should I do?
If you feel you have tax issues around this area then talk to your accountant or tax adviser as soon as possible. If you don’t have all the correct information available then it is possible to use best estimates to calculate the liabilities. There is a Revenue spread sheet available online to assist you with the preparation of any liabilities arising and that includes the calculation of interest and penalties owing but beware the following;
- The calculator is for a high rate taxpayer while the income could be taxed at the lower rate or a combination of both higher and lower
- PRSI and USC are included in the calculator and in some cases PRSI wouldn’t apply nor would USC apply to some types of income
- You could benefit from Irish tax credits for some incomes and you may also have paid foreign tax which could be available for offsetting against an Irish tax liability
- The penalty rate is set at 10% but in some cases there would be no penalty
- For the 2015 tax year you can self-correct your return so there should be no interest or penalties for that year provided the self- correction is done before the end of October 2017
Why should I sort this out now?
The main reasons for sorting this out before the due date are that you will benefit from the advantages of making a qualifying disclosure which include;
- No publication – your name won’t be published by Revenue
- Reduced penalties – penalty is capped at 10% before 30th April and will increase after that
- Less interest to pay- interest is charged at a daily rate
To get the benefit of a qualifying disclosure the tax liabilities will have to be paid. If you are not in a position to pay the full amount owing then Revenue expect a large down payment with the balance to be paid in instalments over an agreed period.
Don’t delay on this and the best option is to talk to your own accountant as they will have your tax return history and are probably best placed to get a submission together by the due date.If you don’t have an accountant then come and talk to us – firstname.lastname@example.org or contact us on 051396703. You will find very useful information on the Revenue website – www.revenue.ie/en/business/disclosure.html which has a lot of information and FAQ’s on the topic including the spread sheet mentioned above.