Interest Reporting
Frequently Asked Questions (as at 4 June 2008)
General Information
Q: Can you explain the new reporting regime?
A: The Return of Payments (Banks, Building Societies, Credit Unions and Savings Banks) Regulations 2008 have been signed by the Revenue Commissioners under Section 891B (inserted by the Finance Act 2006) of the Taxes Consolidation Act 1997.
The regulations require all Banks, Building Societies, Credit Unions, and the Post Office Savings Bank to make returns to Revenue of interest and other similar payments on accounts or investments. Annual gross payments in excess of €635 will be returned by electronic means to Revenue each year.
Q: For what periods is interest being reported?
A: The payments to be reported for the years 2005 and 2006 are payments made by banks, building societies and the Post Office Savings Bank from which DIRT was deducted. These must be reported by 15 September 2008.
The payments to be reported for the year 2007 are, subject to some exceptions, all interest and other similar payments made by banks, building societies and the Post Office Savings Bank. These must be reported by 31 October 2008.
The payments to be reported for the year 2008 and subsequent years are, subject to some exceptions, all interest and other similar payments made by banks, building societies, the Post Office Savings Bank and credit unions and these must be made by 31 March in the following year. In relation to credit union dividends, the reporting requirements will not operate for dividends paid in respect of periods ending before the end of 2008.
Q: Is there a threshold for the banks, building societies, credit unions and savings banks for reporting to the Revenue Commissioners?
A: Yes. There is a requirement to report interest and other similar payments where the total paid on an account or investment in a year exceeds €635. Where the payments made in a year in respect of an individual investment or account are less than or equal to €635 the payments will not be reported.
Q: What approach are the Revenue Commissioners taking on receipt of this information?
A: Revenue consider that automatic interest reporting will be a major disincentive to the use of domestic accounts for depositing funds which were not properly treated for tax purposes and that reporting of such interest will significantly improve the effectiveness of its computerised risk analysis system used in compliance programmes.
Of course, the vast majority of savings in these domestic accounts consist of funds that were properly treated for tax purposes and these account holders have nothing to worry about.
There will not be a focus on small account holders.
Voluntary Disclosure Initiative
In advance of receiving the first information returns the Revenue Commissioners are encouraging taxpayers who do have tax issues relating to funds deposited in these accounts to come forward prior to the 15 September 2008. Taxpayers who make a voluntary disclosure before this date will pay a reduced penalty and the details of the settlement will not be published in Iris Oifigúil. Additionally, Revenue will not consider initiating a prosecution. The payment, declaration and computation must be made on or before 15 January 2009
Q: What are the requirements for availing of this initiative?
A: While anyone who has tax issues arising from funds invested in financial products liable to be reported should avail at the earliest opportunity to resolve those issues with the Revenue Commissioners, Revenue are specifically targeting persons who at any time during the years 2005, 2006 or 2007 held in aggregate €100,000 or more in accounts or investments the payment on which is reportable under the regulations. Anyone who has held funds in excess of €100,000 in the aggregate and who does not avail of this initiative will be precluded from making a qualifying disclosure in respect of funds held in these accounts after 15 September 2008.
Why should I disclose now?
Q: What advantage is there for me to disclose now?
A: You will receive the benefits of making a qualifying disclosure which are:
- The penalty for underpaid tax will be substantially mitigated;
- Your name and settlement 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.
Q: What if I don't come forward to disclose my undeclared income or gains held in my undeclared bank accounts?
A: When Revenue discovers that a person to whom this initiative applies with undeclared bank accounts funded by undisclosed money has failed to make a qualifying disclosure, that person will be vigorously pursued for unpaid liabilities. The monetary penalty will not be mitigated. The individual's or company's name will be published in the list of tax defaulters in Iris Oifigúil in accordance with Section 1086 of the Taxes Consolidation Act 1997 and the individual or company may also be investigated with a view to criminal prosecution for tax evasion.
Q: Are interest paying current accounts included?
A: Yes, if the aggregate exceeds €100,000.
Q: Is the €100,000 aggregate based on untaxed funds?
A: No, the €100,000 aggregate figure is to be calculated on the basis of both taxed and untaxed funds held in a person's investments.
Q: The capital I invested in the deposit account resulted from income/capital gain that has already been taxed or from a tax free retirement lump sum. Am I required to make a submission to Revenue?
A: No - there is no need for you to take any further action.
Q: The capital I invested came from an Inheritance or Gift on which capital acquisitions tax was paid or no capital acquisitions tax was due. Am I required to make a submission?
A: No - there is no need for you to take any further action.
Q: The capital I invested came from a forestry premium. Am I required to make a submission to Revenue?
A: A forestry premium is exempt from tax under S232 of the Taxes Consolidation Act 1997. Therefore, no taxation liabilities arise where these monies are saved in accounts that are now subject to reporting obligations.
What is the position relating to joint accounts?
A: If you are the beneficial owner of funds in accounts now being reported and are in tax default then you are required to make a submission by 15 September 2008
Q: If the interest was subject to DIRT is there any further tax liability?
A: From 1993/94 the DIRT payment satisfied the tax liability on the investment income.
Q: I failed to include in my returns interest, which was subject to DIRT prior to 1993/94. Am I required to make a submission?
A: If you hold in aggregate €100,000 or more in accounts in the period from 1 January 2005 to 31 December 2007 you are required to make a submission if you were a higher rate taxpayer for any of the years in which you failed to include the interest in a return.
Q: I failed to include interest, which was subject to DIRT, in my return of income. What are the consequences?
A: You have submitted an incorrect return of income and there may be an additional amount due for levies and PRSI. However, the primary focus of this enquiry is on the untaxed funds invested and therefore Revenue will not be concentrating on immaterial amounts owing for levies and PRSI.
Q: What is a "qualifying disclosure" under this initiative?
A: A taxpayer makes a voluntary disclosure by freely disclosing a tax default to Revenue, rather than Revenue discovering it through an investigation. It is a qualifying disclosure if it falls within the conditions specified in the Code of Practice for Revenue Auditors, which is available or using the following link: 
Code of Practice for Revenue Auditors(PDF, 911KB) or from your local Revenue office. For your disclosure to be a "qualifying disclosure" it must be in writing and accompanied by a cheque or bank draft in full settlement. You must also provide details of the source of the undeclared money, a computation of the tax, interest and penalty due, and a declaration that the disclosure is complete.
Q: Can everyone avail of the benefits of this initiative?
A: If you are not currently under Revenue investigation, you may make a qualifying disclosure. You are precluded from the benefits of a qualifying disclosure if you were or are the subject of certain previous Revenue investigations and disclosure projects and failed to give details of all of your undeclared profits or gains, for example
- you held a bogus non-resident ("BNR") account,
- you were previously required to make a disclosure relating to an offshore financial product,
- you were an "Ansbacher" account holder,
- you held a National Irish Bank/Clerical Medical Insurance ("CMI") offshore financial product,
- you have come or may come under investigation arising from the Moriarty or Flood/Mahon tribunals.
- you were previously required to make a disclosure in relation to a Life Assurance Product where the individual investment or the aggregate investments exceeded €20,000.
You should still come forward, but the full benefits associated with making a qualifying disclosure will not be available to you.
Q: Can I make a voluntary disclosure if I am currently being audited by Revenue?
A: No – You are precluded from making a voluntary disclosure under this initiative.
Q: I previously made a disclosure under a previous enquiry. Can I avail of this initiative?
A: If you failed to disclose this account in a previous enquiry then you are required to amend that submission. If, however, the non-compliance arose subsequent to the previous submission then you may avail of this initiative.
Q: I hold in excess of €100,000 in aggregate in account(s) now being reported on but there are no tax issues relating to these accounts. However, I am non-compliant in other aspects. Am I required to make a submission?
A: If you are non-compliant Revenue would encourage you to regularise your tax affairs. However, if there are no tax issues in relation to the monies in the accounts now being reported on, you would not be precluded from making a qualifying voluntary disclosure after the 15 September 2008 deadline.
Q: Can companies that held bank deposits funded by undisclosed money make a qualifying disclosure under this initiative?
A: Yes - however, in general companies do not hold accounts that are subject to DIRT and therefore unless a company holds such an account they are not precluded from making a voluntary disclosure after 15 September 2008.
Q: What if the company does not hold an undeclared bank account but a director of the company holds the account, which has been funded by untaxed money extracted from the company?
A: Revenue is following the practice used in dealing with the Bogus Non-Resident and Offshore enquiry cases. The company can make a qualifying disclosure under this initiative where a director of the company held an undeclared bank or other account and untaxed money extracted from the company funded the capital invested.
The company must
- calculate the amount of its undisclosed liabilities and
- disclose and pay that amount as if the company were the account holder.
The undeclared bank account disclosed in completing the Statement of Disclosure will be the account held in the name of the director. This should allow directors and their companies to deal comprehensively with undisclosed tax liabilities, where both corporate and personal liabilities arise.
Q: The person who held the undeclared bank account is deceased. May the executor or administrator make a qualifying disclosure?
A: Yes - if the account holder is deceased, the executor or administrator should make a qualifying disclosure and pay any liabilities on which the executor or administrator is assessable in respect of the estate of the deceased.
Calculation Issues
Tax Computation
Q: What is involved in the tax computation?
A: There are four elements to the computation - the undeclared money; the tax and PRSI/levies due on this money; the statutory interest due for late payment of the tax; and a "tax-geared " penalty.
Q: How much do I owe?
A: The answer to that question will vary in every case. It depends on how much money is undeclared and under which "tax" type (Income Tax, VAT, Capital Acquisitions Tax, etc.) the source is chargeable. The longer it has been since you failed to declare the money, the more statutory interest will be payable. The circumstances of your case will also determine the penalty payable.
Q: Will Revenue calculate the figures for me?
A: No. For a qualifying disclosure to be valid, the person making the disclosure must provide a full computation of tax, interest and penalty. Revenue staff will give assistance where possible by providing information about tax rates, rate bands, thresholds, etc. You may wish to consult a professional advisor to assist you.
Undeclared money
Q: What is the "undeclared money"?
A: The first thing to be determined for your computation is how much money you have not previously declared for tax purposes. You should declare EVERYTHING previously undisclosed, not just the money invested in the undeclared bank account. The undeclared money should be categorised - was it income from a trade, profession or investment; or a gain from the sale of an asset; or a gift or inheritance? The category into which it falls determines how the money is taxed.
Q: Am I entitled to any deductions in calculating this undeclared money?
A: Revenue is following the practice used in dealing with Bogus Non-Resident and Offshore products enquiry cases. Taxpayers with untaxed relevant earnings (not investment income, gains, gifts or inheritances) in tax years up to and including 1989/90 can put 15% of such earnings into a pension fund. This reduces the amount of income on which income tax must be paid. This applies to undeclared earnings up to 1989/90 only - not to subsequent undeclared earnings. You will have to provide proof that you have paid into a pension fund.
Otherwise, in calculating the undeclared income, gains, gifts or inheritances, you can claim deductions permitted under the Taxes Consolidation Act 1997, the Value Added Tax Act 1972, the Stamp Duty Consolidation Act 1999, or the Capital Acquisitions Tax Consolidation Act 2003, as appropriate, but you will have to show you are entitled to make these deductions.
Q: What if I can't get full information about how much money I did not declare?
A: Where records are not available for earlier periods, estimates, which can be shown to be best estimates based on reasonable assumptions, should be used to ensure that liabilities are calculated, disclosed and paid by the 15 January 2009 deadline.
Provided reasonable assumptions are used in the calculations, problems should not arise in the course of any future inspection by a Revenue auditor. Benefits will be retained
- as respects the disclosure made and
- as respects additional amounts, if any, to be paid in respect of adjustments and corrections.
Calculation errors, which are not significant, will not invalidate the benefits of disclosure and payment.
Tax, PRSI and Levies Now Due
Q: What about the tax and PRSI/levies due?
A: After working out how much you did not declare, you then work out the tax due on this money.
- If the money is income you did not declare, it will be subject to Income Tax, PRSI and levies.
- If you failed to declare income from a VAT-able activity, you will also have to pay Value Added Tax.
- If you failed to declare a gain on the disposal of an asset, you will be liable to Capital Gains Tax.
- If you failed to declare a gift or inheritance, you will be liable to Capital Acquisitions Tax.
- Some taxpayers could be liable for other taxes such as Corporation Tax, Stamp Duty and Relevant Contracts Tax.
Q: How are liabilities to be calculated where the director of a closely held company holds an undeclared bank account funded by undisclosed monies?
A: In such cases it may be difficult to determine whether the undeclared money was originally the company's money or the director's money. The most practical way to calculate the undeclared liabilities, including VAT, is to assume that the money and undeclared income belonged to the director, rather than the company, from the start. Any reasonable decision on this will not be challenged.
Q: How are liabilities to be calculated where the money in an undeclared bank account held by a director is treated as having been funded by untaxed money extracted from the company (i.e. it is not assumed to have always belonged to the director)?
A: "Untaxed money extracted" refers to a failure to pay any taxes due.
Money appropriated for the benefit of directors of a closely held company will normally be regarded as additional remuneration of the directors. The company will have a corresponding additional PAYE liability in respect of the remuneration and may also have a VAT liability in respect of undisclosed receipts. In calculating the PAYE liability of the company,
- the remuneration will be treated as the amount extracted less any related amount of VAT now being paid, and
- it will not be necessary to "regross" the remuneration by reference to the PAYE liability - that is, the amount taken out of the company (less the VAT) and invested in an undeclared bank account will be treated as the director's pay before tax, not after tax.
In such circumstances, no adjustment to the corporation tax liability will be treated as arising, whether to charge undisclosed receipts as profits or to deduct undisclosed remuneration from profits. The director may have other liabilities.
In each case the company will be obliged to account for VAT, where due, on any undisclosed receipts.
Statutory Interest
Q: What is "statutory interest"?
A: Statutory interest is charged for late payment of tax, PRSI and levies. Statutory interest runs from the due date for payment in each tax period until the tax is paid. For Income Tax, payment is due by the "preliminary tax" date; different dates will apply to the other taxes. The statutory interest is a percentage of the tax (plus PRSI/levies) underpaid. The Finance Act 2005 provides that all late payment interest rates in respect of tax (i.e. IT, CT and CGT) are calculated on the basis of a daily rate, including those rates that were previously expressed in terms of a monthly rate.
There is no "cap" on statutory interest.
| Period (inclusive dates) | Daily Interest Rate |
|---|---|
| From 01/11/1990 to 31/03/1998 | 0.041% |
| From 01/04/1998 to 31/03/2005 | 0.0322% |
| From 01/04/2005 | 0.0273% |
Please note: "statutory interest" is the interest charged by Revenue.
Q: My undeclared income goes back over 20 years. Do I have to pay 20 years' worth of statutory interest?
A: Revenue is extending the practice used in dealing with Bogus Non-Resident (BNR) and Offshore Account holders and updating that to allow that income arising in years up to 1997/98 may be treated as income of that year. If the income was earned in 1980, for example, you can treat it as income of 1997/98, calculate the tax due on that income, and pay statutory interest on the unpaid tax at the rate applying to 1997/98.NB - you can also choose to tax the money at the tax rates and bands applying in 1980, for example, but the statutory interest will run from 1997/98.
Penalty
Q: What is the "penalty" payable?
A: The penalty is described as "tax-geared" because it is not a fixed penalty, but a percentage of the tax (plus PRSI/levies) underpaid. There is no "cap" on the penalty.
Q: What percentage of the tax will the penalty be?
A: If the tax default arose in a period ending on or before 5 April 1991 - that is, up to the tax year 1990/91 - by law, the penalty for underpaid tax cannot be mitigated. In those periods, therefore, the penalty is 100% of the tax due. After that, the penalty can be mitigated for co-operation and for making a voluntary disclosure, depending on the type of tax default involved. In the circumstances of these disclosures the rate of the penalty is 10%.
However, where income or gains arose prior to 5 April 1991 the income or gain will be assessed by reference to the rates pertaining in 1997/98 but the penalty will be 100% of the tax owing.
In the case of the estate of deceased persons there will be no penalty, unless there was a binding agreement with the deceased before death, only the tax and statutory interest are payable.
Interest and Penalties for Capital Acquisitions Tax
Q. The money invested in the deposit account arose from a gift or inheritance on which Capital Acquisitions Tax (CAT) is payable. What statutory interest and penalties are due on the CAT?
A. Statutory interest is due on CAT as per the table below. Interest on CAT is chargeable from the date the tax fell due until the date it is paid.Under CAT legislation Revenue may mitigate the interest to 100% of the tax unpaid or underpaid, depending on the circumstances of the case. For the purposes of this disclosure scheme the 100% cap can be applied.
For gifts and inheritances received before 1 October 2003 but not declared or not wholly declared to Revenue, if a CAT return was not filed there is a fixed penalty of €2,535.
If an incorrect CAT return was filed there will be a "tax-geared" penalty, which can be mitigated on the same lines as penalties for other taxes. If the tax default arose in a period ending on or before 5 April 1991 - that is, up to the tax year 1990/91 - by law, the penalty for underpaid tax cannot be mitigated. In those periods, therefore, the penalty is 100% of the tax due. After that, the penalty can be mitigated for co-operation and for making a voluntary disclosure, depending on the type of tax default involved. If a person not currently under investigation by Revenue makes a qualifying disclosure and co-operates with Revenue, for periods ending after 5 April 1991 the penalty can be mitigated to 10% of the tax now due.
For gifts and inheritances on or after 1 October 2003 statutory interest is due together with a penalty as provided in the Code of Practice for Revenue Auditors. The penalty will be 10% of the tax owing. This tax-geared penalty will cover both any potential surcharge arising and any penalty arising from the non-submission or the submission of an incorrect return.
Table of interest rates for Capital Acquisitions Tax (CAT)
| Period | Monthly Interest Rate (per month or part thereof) | Period | Daily Interest Rate (per day or part thereof) |
|---|---|---|---|
| From 06/04/1991 to 31/03/1998 | 1.25% | From 01/09/2002 to 31/03/2005 | 0.0322% |
| From 01/04/1998 to 31/08/2002 | 1% | From 01/04/05 to date | 0.0273% |
Payment
Q: How do I work out the total amount due?
A: To get the total you add the tax, statutory interest and penalty together, remembering to convert from Irish Pounds into €s, where necessary.
Q: How do I pay what I owe?
A: You may submit a bank draft or cheque made payable to the Revenue Commissioners.
Q: What if I can't pay the liability in full?
A: You must
- make a full disclosure, and
- give a full account of your circumstances, including ALL your assets and liabilities
In these circumstances, the form should be submitted well in advance of the 15 January 2009 deadline, so that Revenue has an opportunity to consider whether you are unable to pay the full liability as calculated.
You should also make a payment on account - that is, pay a substantial portion of your liability. If you do, the rate of statutory interest will be fixed at the date the payment is received. If you do not make a payment on account, the rate of statutory interest will continue to rise on a daily basis until you do. You should explore options for paying the balance of the money.
Where
- the extent of your ability to pay and the payment to be made are agreed and
- the agreed payment is made
the treatment outlined in this leaflet will be applied.
The same requirements will apply where the inability to pay relates to liabilities in respect of which an executor or administrator is assessable in respect of the estate of a deceased undeclared bank account holder.
Declaration
Q: What kind of declaration is required?
A: You should make a declaration in the following terms:
"I declare that, to the best of my knowledge, information and belief, all statements I have made in this disclosure are correct and complete."
Q: Where do I send the Notice of Intention to Disclose?
A: Please send it by 15 September 2008 to
Office of the Revenue Commissioners
Investigations and Prosecutions Division
Underlying Tax Project Office (Interest Reporting)
4th Floor
1 Clanwilliam Court
Lower Mount Street
Dublin 2
Q: Where do I send the Statement of Disclosure?
A: Please send it to the same address to which you sent the "Notice of Intention to Make a Qualifying Disclosure" to arrive by 15 January 2009:
Office of the Revenue Commissioners
Investigations and Prosecutions Division
Underlying Tax Project Office (Interest Reporting)
4th Floor
1 Clanwilliam Court
Lower Mount Street
Dublin 2
A Revenue Helpline is available at;
01- 647 4818, Monday to Friday,
8.30 a.m. to 4.30 p.m. (inclusive)
After Making a Disclosure
Q: What happens once I submit my statement of disclosure?
A: On receipt of the disclosure and payment an acknowledgement will issue to yourself or your tax adviser.
Q: What if I've made a mistake in my disclosure, or if I've under-estimated the tax, interest and penalty due?
A: If you've underestimated the amount payable, you will be liable to pay the balance - the additional tax, statutory interest and penalty. The percentage rates of statutory interest and penalty will stay the same, but the amounts will be higher because they will be based on a higher amount of tax.
If you would like any questions added to the above list please e-mail your question using the following link utproject@revenue.ie
