Growing Frustration amongst self-assessed tax payer at not being Able to Offset Property Losses against Other Income
This is the time of year that thousands of self-employed, non-PAYE employees and a growing number of PAYE employees now dread – just 2 weeks until the Oct 31st tax return deadline. Leading tax experts taxback.com say that in keeping with other years they expect that a large number of those who are due to file a tax return simply will not do so and a further group will file but will fail to meet the deadline. The latest Global Entrepreneurship Monitor (GEM) Report 2011 shows that 2,200 people started a new business in Ireland every month in 2011 which means that the number of those required to file a tax return is also growing.
The tax experts contend that this year the numbers may be impacted by the 40% plus that have defied the authorities and have yet to pay their household charge. Anecdotal evidence suggests a possible growing level of non-compliance when it comes to tax and the upcoming deadline will be a real test for the system. Traditionally, up to 20% fail to file in time, but with on-going losses and reduced allowances on property investments, many of those filing fear a massive tax bill and may choose to bury their heads on the issue.
Christine Keily, tax specialist with taxback.com commented, “Realistically people only have a few weeks left to get their tax affairs in order and this is the busiest time of the year for tax specialists, so it’s important to give them the necessary material as early as possible. If you have affordability issues, then it’s imperative that you make them known to the Revenue and it’s equally important to ensure that you are claiming every possible allowance, so get good advice.
Generally, where information is received after the second week of October it is almost impossible to guarantee that the deadline will be met and therefore people may incur a fine for late submission.
Revenue is fastidious when it comes to self-assessed tax payers filing tax returns and is consistently strict on imposing penalties. Judging by the returns we submitted last year, where we were often asked to also file for previous years as well, we believe that up to 1 in 5 newly established self-employed individuals must be failing to file in the correct year. This will inevitably lead to fines and penalties, though the sooner it’s dealt with the lower the likely cost”.
Learn from the follies of others
The tax experts contend that those who think they will “get away with” tardy efforts to file or not filing at all grossly underestimate the resolve of the Revenue.
In 2011 Revenue auditors carried out 11,066 audits resulting in a yield of €440.5 million. A total of 546,502 assurance checks, a less intrusive form of intervention, produced a yield of €81.3 million. At the sharp end of compliance, Revenue secured 30 Court convictions for serious tax and duty evasion in 2011, up from 13 in 2010. Eight custodial sentences ranging from 7 to 36 months and 15 suspended sentences. In addition, fines amounting to €1.17 million were imposed in 513 summary prosecution cases. While not all of these relate to self-assessed cases the significant time interruption and potential cost should be noted by anyone who thinks that the Oct 31st deadline is not stringently enforced.
Taxback.com says that penalties for non-compliance vary but that there is some standardisation in assessing fines etc.
Keily continued, “Returns for income arising in the year ending 31st December 2011 must be filed on or before Wednesday 31 October 2012 to avoid a surcharge. The surcharge amounts to 5% of the amount of tax payable for the period subject to a maximum surcharge of €12,695, where the return is filed within two months of the deadline. Otherwise if the return is filed more than 2 months after the deadline, a surcharge of 10% is imposed subject to a maximum of €63,485. In the worst case scenario, people may be faced with tax geared penalties which can be as much as 100% of the tax liability.”