Taxpayers throughout the country have received a letter from Revenue about the deadline for reporting foreign income and gains on 30th April 2017 if they were not previously declared or were declared incorrectly. I have put together 9 key points about this deadline:
- Taxpayers who have a correction to make regarding “offshore matters” and do so by 30th April 2017 can avail of the benefits of the qualifying disclosure regime (i.e. lower penalties, no publication on the list of tax defaulters and also Revenue will not look to prosecute).
- “Offshore matters” can include
- Foreign accounts
- Foreign income arising from an employment, office or pension
- Foreign property, or
any other income, gains, accounts or assets held or situated anywhere outside of the Republic of Ireland (including Northern Ireland).
3. Examples of situations where taxpayers may have an offshore issue and need to consider whether the underlying funds and associated income/ gains have been declared, include:
- a taxpayer may have deposited funds in a bank account in Northern Ireland or elsewhere in the UK and be in receipt of UK deposit interest, which has not been included in their Irish tax return,
- a person who worked in the UK could be in receipt of a UK pension or hold shares in a UK company and details of the pension, dividends, or share sales may not have been included in their tax return
A qualifying disclosure may also be required where a taxpayer has previously incorrectly reported, or understated foreign income or gains in their tax return, such as the case where a gain arising from an offshore fund has been incorrectly treated as capital in nature rather than income. Given the very complex tax legislation governing offshore funds and the multitude of different products in the market, there could be cases where genuine mistakes have been made in the past.
Other types of scenarios that could give rise to a matter requiring disclosure include:
- inheriting property abroad
- owning an overseas property that is either rented or has been sold
- having earnings from an employment in another country
- earning profits from running a business in another country
- receiving income in a family trust established outside Ireland
- undeclared income or gains on a UK stockbroker account opened to avail of lower commissions
- Interest earned on a bank account in Northern Ireland opened during the banking crash
- Deemed profits on certain foreign investment products after 8 years
This list is indicative of the type of circumstances that can give rise to a need to make a disclosure. It is not exhaustive.
4. The qualifying disclosure facility will not be available post 1 May 2017, where the matter being disclosed relates directly / indirectly to “offshore matters. This means that disclosures of certain domestic matters post 1 May 2017 will also be unable to obtain the benefits of qualifying disclosure. Where a disclosure is not a “qualifying disclosure”
- full penalties will be charged (potentially 100% of any underpaid Irish tax),
- details of the tax default will be published (if the threshold, currently €35,000 is exceeded), and
- potential criminal prosecution for the taxpayer;
5. If Revenue discover an offshore matter after 30 April 2017 that has not been disclosed pre 30 April 2017, it could impact on a taxpayer’s ability to make a disclosure on an unrelated onshore matter (if the undeclared offshore matter amounts to more than 15% of the total tax due in a return),
6. The disclosure deadline of 30th April applies to all taxpayers i.e. individuals including PAYE taxpayers, trusts, companies etc.
7.Taxpayers who are going to make a disclosure before the 30 April 2017 deadline should be aware that a penalty does not always apply where tax has been underpaid. A penalty will not apply to an underpayment of tax if the aggregate amount of tax / duty underpaid is less than €6,000 and the default is not in the “deliberate behaviour” category. Furthermore, no penalty will apply once the matter is disclosed to Revenue:
- where an error is “self-corrected” within a set time limit
- in the case of innocent error
- where there is a “technical adjustment” arising from a difference in interpretation.
However, even though a penalty may not arise on an offshore matter, the matter itself must still be disclosed.
8.There is no minimum threshold on the level of foreign income and gains that must be declared.
9.The deadline of 30th April 2017 represents a final opportunity for taxpayers to come forward and make disclosures voluntarily, before new exchange of information rules increase the data available to Revenue about Irish taxpayers’ offshore interests. This year, Revenue will start to receive bank and other financial account information from over 100 countries globally, not just tax havens.
If you have any queries regarding a disclosure to be made before 30th April 2017, please do not hesitate to contact me at email@example.com or by phone to 059 862 4852