The Gazette 1989

GAZETTE

DECEMBER 1989

Statutory Self Assessment for Capital Acquisitions Tax

INTRODUCT ION Since 1 September, 1989, self assessment has been mandatory for capital acquisitions tax. For solicitors, this means that, when a return of a gift or an inheritance is being made on behalf of a client, they must ensure that - the return is made on a special self assessment form (form I.T.38); - the tax, and any interest on tax, is assessed on that return; - the amount of the tax, and any interest, is forwarded with the return to the Revenue Commissioners. An important point to note is that self assessment is mandatory for all cases where a return has not yet been made.

- deliver a return to the Revenue Commissioners; - make on that return an assess- ment of the tax and interest due by him; - forward the amount of the assessment to the Revenue Commissioners. The return needs to be delivered only when the taxable value of the gift or inheritance involved by itself, or when aggregated with the tax- able values of other gifts or in- heritances taken by the donee or successor, exceeds 80% of an amount which is tax-free in the computation of tax on the gift or inheritance involved. However, irrespective of this 80% rule, the donee or successor must comply with the self assessment provis- ions in respect of a gift or in- heritance, if required by notice in writing by the Revenue Commiss- ioners, within four months of such notice being given. Section 36 of t he Capital Acquisitions Tax Act, 1976, as originally enacted, contained pro- visions requiring - accountable persons other than donees or successors (for example, personal representa- tives or trustees) to deliver a return on request from the Revenue Commissioners; - any accountable person to deliver, on request from the Revenue Commissioners, an

The introduction of mandatory self assessment follows an ex- t r eme ly success f ul vo l un t ary scheme which had been adminis- tered by the Capital Taxes Branch in co-operation w i th the Law Society and local Bar Associations. As part of the voluntary scheme the Capital Taxes Branch, in co- operation with the professional bodies, provided training seminars on self assessment throughout the country. Over 1,000 solicitors have now attended these seminars. This suggests that solicitors as a pro- fession are well prepared to meet the challenge of self assessment, and to benefit from the speedier and more streamlined administra- tion which self assessment offers. This is borne out by a very en- couraging feature of the voluntary scheme - self assessments made by solicitors were mostly error-free. This contrasts strongly with the ex- perience in other tax jurisdictions such as Australia where, during the introductory phase of self assess- ment, assessments were incorrect- ly made in a very high proportion of cases. This article provides an overview of the new statutory arrangements - in respect of legislation, admin- istration and compliance. LEGISLATION The relevant legislation is con- tained in Chapter II of Part V of the Finance Act. 1989 (sections 74 to 79 inclusive). The key sections from a solicitor's point of view are as follows:

by J o hn Reid and Tony F i t zpa t r i ck Cap i t al Taxes Br anch Section 74 is the principal section involved. It is largely a re- draft of Section 36 of the Capital Acqu i s i t i ons Tax Act 1976 ("delivery of returns"). It incorpor- ates amendments to that secion contained in the 1982 and 1984 Finance Acts which were necessit- ated by the amendments in these Acts to the method of computing tax. Broadly speaking, a person who is primarily accountable for the payment of gift tax or inherit- ance tax (usually the donee or the successor) must, w i t h in four months of the valuation date or 1 September, 1989, whichever is the later, and without being notified to do so,

CAPITAL ACQUISITION TAX SELF ASSESSMENT KEY FEATURES

- tax must be self assessed; - payment of the tax any any interest must accompany the return; - interest is payable on all tax not paid within four months of the valuation date; - training seminars for solicitors have been run by the Capital Taxes Branch; further seminars will be provided on demand; - a Tax Advisory Service has been established in the Capital Taxes Branch; staff are available to provide advice - by telephone or by interview; - assessment workshops will be organised on demand.

3 7 3