The Gazette 1989

GAZETTE

DECEMBER 1989

additional return if it appeared to the Revenue Commissioners that a return already made by that accountable person was defective; - any accountable person to deliver to the Revenue Com- missioners, w i t h o ut being required by them, an additional return if he became aware that the return or additional return already delivered by him was defective. These provisions are retained in the revised legislation but tax and interest must be assessed on the return, and payment must accom- pany delivery of the return. Where tax may be paid by instal- ments, provision it made for the self assessment and payment of the instalments due at the date of assessment and for the payment of any further instalments when they become due. Provision is also made for the discharge of inheritance tax by transfer of Government secur- ities, the requirements being that any payment of tax and interest (in excess of the nominal value of the Government security or securities) should accompany the return and that any transfer of the security or securities to the Minister for Finance should be completed expeditiously. The new sec t i on 36 also authorises the Revenue Com- missioners, for audit purposes, to call for a statement, wi th support- ing evidence if necessary, relating to property comprised in a gift or inheritance. They may also inspect any property comprised in a gift or inheritance and any books, records, accounts or other documents which may be relevant to the assessment of tax in respect of a gift or inheritance. Section 76. Under the original capital acquisitions tax legislation, interest was not charged on tax where a return was delivered by an accountable person within three months of the valuation date, and a further interest-free period of one month was allowed for payment when the tax was assessed by the Revenue Commissioners. This maximum interest-free concession of four months is now being applied by this section to self assessments of tax made by or on behalf of the accountable person. The section also enables the Revenue Commissioners to treat

conditional or incorrect payments of tax as payments on account of tax. Section 77 updated the penalties contained in section 63 of the Capital Acquisitions Tax Act, 1976. Failure to comply wi th the self assessment requirements could result in a penalty of £2,000. Section 78 contains various consequential provisions arising from the fact that the 3% discretion- ary trust tax imposed by the Fin- ance Act, 1984, is now also subject to mandatory self assessment. Section 79 imposes a surcharge in respect of any serious under- valuation of an asset which is comprised in a gift or inheritance and which is included in a return delivered by or on behalf of an accountable person. Over the years, many solicitors have com- mented on the difficulty encounter- ed from time to time in persuading clients to submit realistic valua- tions, particularly for real property, despite the fact that in many in- stances these undervaluations led to delays and additional compliance costs for taxpayers and their advisers. The purpose in legislating for this surcharge was hopefully to eliminate the practice of submitting serious undervaluations. The sur- charge consists of an amount (30%, 20% or 10%) of the tax ultimately attributable to the undervalued asset, and where im- posed will be legally deemed to constitute part of the tax due. The operation of the surcharge is illu- strated in the accompanying box.

ADMI N I STRAT I ON The new process

The new procedures are as follows: (1) Completion of a tax return (form I.T.38); assessment of tax and interest (if any) by the taxpayer or by his or her agent; ( 2 ) Lodgement in the Capital Taxes Branch of the completed return with a remittance for the tax and interest due; ( 3 ) Checking of each return for arithmetic accuracy by staff in the Capital Taxes Branch. Minor errors will be corrected by Revenue staff. If significant errors are discovered the re- turn will be sent back for re- assessment. it is important to note that the delays arising from the submission of incom- plete or incorrect returns could result in additional interest charges. The administrative practice which operated until recently, whereby interest was not charged on outstanding tax during periods when the returns were lodged with the Capita! Taxes Branch, will no longer apply, interest on overdue tax will be charged from the valuation date. ( 4 ) All returns are screened to determine whether a detailed examination (an audit) is required in respect of all as- pects of the gift or inheritance. ( 5 ) Each return form includes an application for a certificate of discharge from capital acquisi- tions tax (the red form C.A.11).

Operation of the surcharge for serious undervaluations provided for in section 79, Finance Act, 1989 An accountable person delivers a return in respect of a house devised to him absolutely by his deceased brother. The market value of the house is ascertained by the Revenue Commissioners at £50,000 under section 15 of the Capital Acquisitions Tax Act, 1976. The tax ultimately payable on the valuation of £50,000 is £8,000 If the value of the house shown in the return delivered by the brother of the deceased person - is £35,000, that £35,000 is 70% of £50,000, and no surcharge is involved; - is £25,000, that £25,000 is 50% of £50,000, and the surcharge is 10% of £8,000 = £800; - is £20,000, that £20,000 is 40% of £50,000, and the surcharge is 20% of £8,000 = £1,600; - is £15,000, that £15,000 is 30% of £50,000, and the surcharge is 30% of £8,000 = £2,400. In addition to the usual rights of appeal in respect of valuations, the taxpayer has an additional right of appeal to the Appeal Commissioners against the imposition of the surcharge on the basis that he had reasonable grounds for his estimate of the market value of the asset giving rise to the surcharge.

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