Shares and Tax

voodoo

Hi all,

Wondered if anyone had any thoughts on time periods you can be hit with tax on shares. Here's my dilemma... about 4 and a half years ago, I sold some share options I held to a total value of about €20,000. At the time, I needed all of it for the deposit for a house and so didn't pay the tax on it! Now I'm starting to worry about the implications of these actions now! Is there any timeframe whereby the govt cant come back to me for the tax? I recall something about 5 years, but not sure! On the other hand, I also recall something about paying interest on tax that wasn't paid... Therein lies my dilemma....

If anyone has any thoughts, I would greatly appreciate it.

Cheers,

Voodoo

RainyDay

Here's my thoughts - just pay your damn taxes, will ya? Why should you get to evade tax at the expense of the majority of compliant tax payers.

There is a good chance that if you proactively 'fess up to Revenue yourself now, you will avoid being hit with penalties, though you almost certainly will get hit with interest. On the other hand, you could wait for Revenue to notice that some of your colleagues paid tax on stock options and you didn't, in which case you'll get hit with penalties on top of the interest.

ck1

I am assuming from your original post stating that these were Share Options that you paid your BIK (Relevant Tax) on acquisition. For CGT purposes remember your tax liability is added to your base cost to ascertain your actual gain.

Revenue are clamping down on these but not concentrating on them at the moment but I have no doubt that they will do an excercise in the future on this area. But because you received these under a Share Option Scheme they will have full records and they will spot it eventually anyway. Presently they are concentrating on undisclosed monies primarly held in Single Premium policies. As you will see from the media they are going back 20 year. And thats only the begining !!!!

RainyDay is right, you could probable avoid the penalty (that is unless you did not pay the Relevant Tax on Exercising the Option) but interest, probably not and this is charged at aproximately 12% per annum.

voodoo

Guys,

I am beginning to believe that I am going to be caught in a big way for this! At the time, I excercised and sold my share options at the same time! I was of the impression that I therefore wasn't affected by two forms of taxes (this would only have kicked in if I excercised and held the options...at least thats what we had been told).

Anyway, I didn't pay any tax at the time of selling the options as I (like alot of people) used the money to go towards a deposit for my house!

I am not trying to avoid any taxes, but more that I am now realising that my actions were foolish and that I will be hit with alot of tax penalties and backdated tax!

If anyone knows of anyone that I could perhaps speak to on this to get further clarification, I would greatly appreciate it.

Regards,

Voodoo

ck1

If you exercised your options and sold them at the same time then only Relevant Tax is applicable which effectively is your highest rate of tax. In anyway, the highest rates of tax would always be payable however if you were in the standard rate band special application would be made to apply this rate. There is an exception to the rule but this relates to 7-year options but in this case it would be a worse situation.

Professional point of view - It would be very hard for someone to mitigate interest and penalties on a case like this one, the best that I feel that you could hope for is mitigation of penalties or at least mitigated to the minimum of 5% (potential penalties could be up as far as 200%). Interest if you get this mitigated or even partially mitigated you would be very lucky.

Best advise I could give is that you look at all your other years and see if you would potentially be due a refund, for such things as Mortgage Interest Relief, Rent Relief, overpayment of tax because you were on Week 1 basis, medical fees refund, extra credits that you were due, college fees, etc.

However, I will say that the cost of you getting a consultant to do this and deal with the Revenue on your behalf could be quite high. Whether or not you decide to do this would largely be dependant on state of the case. One main reason why you might want to have someone dealing on your behalf is to avoid publication and potential prosecution, but in a case whereby you disclose, prosecution probably would not even come up.

I am not trying to put the frighteners on you but I deal with these type of things on a regular basis and deal with the Revenue Commissioners daily and have a lot of contact with the Prosecution Division at Revenue. They are not unreasonable by any means but have been given strict guidelines to act under. Check your own stuff out if you can first.

ck1

Something interesting, just had a case back from Revenue whereby submitted purely a Capital Gains Tax calculation of a liability due in 2001 but only submitted the Capital Gains Tax calculation with no other tax details. The Revenue have just accepted the exact amount of tax with no penalties or interest. I must admit that I did put a very strong case forward and can't believe that it was accepted. I expected the assessment to come back with at least some charge.

Your case is slightly different as the tax due for you is Income Tax but you never know, maybe the Revenue have a heart after all !!!!