Tax avoid­ance schemes see the rules get tighter

This year’s Bill makes it eas­ier for Rev­enue to refuse tax­pay­ers tax re­lief

The Irish Times - Friday - The Ticket - - BUSINESS NEWS - Cliff Tay­lor

The Fi­nance Bill rep­re­sents a sig­nif­i­cant up­ping of the pres­sure from the Rev­enue Com­mis­sion­ers in clos­ing off what it sees as the im­proper use of tax avoid­ance schemes.

In most Bills there are mea­sures to close off some par­tic­u­lar schemes which the Rev­enue has dis­cov­ered, but in re­cent years gen­eral anti-avoid­ance rules have made it more dif­fi­cult to come up with and avail of such schemes in the first place. This year’s Bill con­tin­ues that trend.

The spe­cific tar­gets this year are the use of ap­proved re­tire­ment funds and per­sonal re­tire­ment sav­ings ac­counts to cut down on tax bills. Re­tire­ment plan­ning has long been a bat­tle ground be­tween the Rev­enue Com­mis­sion­ers and tax ac­coun­tants and this is the lat­est shot.

Per­haps the more sig­nif­i­cant mea­sures are the tight­en­ing of gen­eral rules on the use of tax avoid­ance schemes. Here the cur­rent rules have been rewrit­ten into new sec­tions, but also tight­ened.

In par­tic­u­lar in cases where the Rev­enue be­lieves a tax re­lief is be­ing im­prop­erly claimed, it will be eas­ier and quicker for it to claim the money back from the tax­payer. At the mo­ment a nom­i­nated Rev­enue of­fi­cer must form an opin­ion that an al­lowance is be­ing im­prop­erly claimed and is­sue this to the tax­payer. In fu­ture the Rev­enue will be able to act straight away and look for the tax due.

“What we have in this year’s Bill is a rewrite of the ex­ist­ing 25-year-old rule mak­ing it far eas­ier for Rev­enue to refuse tax re­lief to any tax­payer at any time, while mak­ing it more dif­fi­cult for the tax­payer to de­fend their ac­tions,” says Brian Kee­gan, head of tax­a­tion at Char­tered Ac­coun­tants Ire­land.

The sur­charge payable when some­one claims tax re­lief due to par­tic­i­pa­tion in a tax avoid­ance scheme which breaches the rules has been upped from 20 per cent of the tax re­lief claimed to 30 per cent.

The new Bill also con­sol­i­dates the rules un­der which tax­pay­ers and their ad­vis­ers must dis­close par­tic­i­pa­tion to the Rev­enue in cer­tain schemes in ad­vance – so-called manda­tory dis­clo­sure – and ex­tends this to the use of dis­cre­tionary trusts.

All th­ese rules will not end tax plan­ning but grad­u­ally the more ex­otic schemes are be­ing closed down and the Rev­enue is in­tro­duc­ing new ways to po­lice ev­ery tax­payer.

Else­where, as is of­ten the case in re­cent years, the Bill in­cludes a lot of smaller, spe­cific mea­sures and much of the ac­tion may come in amend­ments as it passes through the Oireach­tas. The bud­get mea­sures are leg­is­lated for. Apart from th­ese, drinkers of herbal teas will be glad that VAT of 23 per cent is be­ing re­moved so it should be cheaper. How­ever, you will still pay 9 per cent on your herbal tea in a restau­rant and 23 per cent on iced tea – con­sid­ered a soft drink. Go fig­ure!

The Bill in­cludes the promised mea­sures to close off the “dou­ble Ir­ish” tax re­lief and in­tro­duce new re­liefs aimed at for­eign in­vestors. It also ex­tends the valu­able spe­cial as­signee re­lief pro­gramme aimed at giv­ing a sig­nif­i­cant tax break to for­eign ex­ec­u­tives who come to work here for their multi­na­tional em­ployer.

The ben­e­fits of this are sub­stan­tial – it will cut taxes and charges on some­one earn­ing ¤200,000 per an­num by ¤12,500.

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