Undeclared rental income

nialldinho

Hi

A colleague of mine is a PAYE employee and has had their apartment rented out since 2011 but has not filed any tax returns. They know they have been pretty clueless but now want to sort this out.

What is their best approach to dealing with revenue?

And what penalties and interest are likely to be applied?

Thanks

nompere

Everything in relation to disclosures, penalties and interest in in here: http://www.revenue.ie/en/practitioner/code-of-practice-revenue-audit.pdf

You'll have to do a complete calcuation of the tax and interest. Revenue won't generally negotiate on those figures. Penalties, if you get to them before they get to you, can vary from a minimum of 3% to a maximum of 20% An experienced tax consultant is likely to be better at mitigation in this area than you, so if the liabilities are large it might be worth going to a specialist.

If you have 4 years of rents, and a PAYE source that covers the basic rate tax band, then you might be looking at an average of about 45% of the net rents in tax, an average of about 25% of those rents in interest, and maybe a 10% penalty on the tax (which includes PRSI and USC)

It's very important to ensure that expenses claims and capital allowances claims are comprehensive - because they will reduce the liabilities significantly.

Particularly note this bit from the Guide:

A ‘qualifying disclosure’ is a disclosure of complete information in relation to, and full particulars of, all matters occasioning a liability to tax that give rise to a penalty, is made in writing, is signed by or on behalf of the taxpayer and is accompanied by:
a) A declaration, to the best of that person’s knowledge, information and belief, that all matters contained in the disclosure are correct and complete
b) A payment of the tax or duty and interest on late payment of that tax or duty.
In addition –
• all qualifying disclosures (prompted and unprompted) in the deliberate behaviour category of tax default must state the amounts of all liabilities to tax, duty and interest, in respect of all taxes and periods, where liabilities arise, as a result of deliberate behaviour, that were previously undisclosed
• in the case of a prompted qualifying disclosure in the careless behaviour category of tax default, the qualifying disclosure must state the amounts of all liabilities to tax, duty and interest in respect of the relevant tax and periods within the scope of the proposed compliance intervention
• in the case of an unprompted qualifying disclosure in the careless behaviour category of tax default, the qualifying disclosure must state the amounts of
all liabilities to tax, duty and interest in respect of the tax and periods that are the subject of the unprompted qualifying disclosure.



It's not good enough to deal only with the rents - you must be clear that your colleague has no other tax liabilities under any tax head. So, for example, you will need it to be clear how he first acquired the property, and that there isn't anything outstanding in relation to that.

Unless you're really sure of what you are doing, send your colleague to a professional.