ICAI Reflects On Revenue's Offshore Investigation Announcement

by Jason Gorringe, Tax-News.com, London

01 April 2009

The Revenue Commissioners have announced that an investigation into the tax treatment of property, assets and funds settled by persons on foreign and Irish trusts and similar structures will commence on September 1. Persons who have undeclared tax liabilities in respect of settlements made on trusts or other structures, such as, foundations, establishments, trust enterprises or offshore companies, may avail of the benefit of qualifying disclosure up to the date of commencement of the investigation on September 1, noted a Revenue release.

The Revenue is urging taxpayers who have tax issues relating to these trusts and structures to come forward, and has announced that those who wish to avail of the opportunity to make a qualifying disclosure to Revenue will receive the following benefits:

• The penalty for underpaid tax will be substantially mitigated;
• Their name and payment amount will not be published by Revenue in the quarterly list of tax defaulters in Iris Oifigúil;
• Revenue will not seek to initiate an investigation with a view to prosecution.

Taxpayers who are already under enquiry or who come within certain excluded categories are precluded from making a qualifying disclosure.

The deadline date for the submission of a notice of intention to make a qualifying disclosure is September 1, 2009. A full disclosure with all due tax, interest and penalties must be made by October 31, 2009.

In a separate statement, ICAI Director of Taxation Brian Keegan noted that the new investigation is structured in the same way as previous investigations into deposit accounts, offshore assets and single premium insurance policies. “While the subject matter of this investigation is complex, Revenue’s focus is simple. Revenue want to establish whether moneys put in trust were properly taxed in the first instance. They are seeking to ensure that trust structures, whether onshore or offshore, are not being used to hide untaxed income and gains”.

"The Revenue’s approach, which involves background information gathering, the issue of a warning, and incentives to pay the tax, interest and penalties owing by a deadline date, is recognised internationally as a successful strategy. This approach has been followed by other Revenue authorities, notably in the UK, for similar investigations. Usually Revenue’s background information gathering takes place after the investigation deadline date. New reporting requirements in last year’s Finance Act mean that Revenue will have their background data by the end of June, though the investigation deadline is September 1. We hope that this will mean the investigation overall can be swiftly concluded”.

ICAI’s release points out that with every successive investigation, the number of people availing of incentives to come forward gets smaller. “Nearly 15,000 people availed of the offshore assets incentive five years ago. By comparison, the last investigation involving deposit accounts last year brought some 2,000 cases into the net. Because of the very specialised nature of this investigation, we expect the numbers of tax defaulters involved to be lower still,” concluded Keegan.

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