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CIA/E T N
JANUARY/FEBRUARY 1982
Correspondence
3rd December 1981
The Editor,
Law Society Gazette,
Blackhall Place,
Dublin 7.
Re: Assessment on Purchasers for Vendors' Land
Dealing Tax
Dear Sir,
I have been trying unsuccessfully since April 1978 to
induce the Society to make proper representations in
regards to the impossible position in which Solicitors
acting for non-resident Vendors
are placed, by reason of
the Revenue interpretation of Section 200 of the Income
Tax Act 1967, as applied to Capital Gains Tax (See the
March 1978 edition of the Gazette, which publishes a
letter from the Revenue indicating that they would use
this Section to assess a Solicitor for his client's unpaid
Capital Gains Tax).
Now, with the passing of the Finance Act 1981, we
have what is potentially a worse problem - where a
Solicitor is acting for a client who is
purchasing from a
non-resident Vendor.
Section 29 of the Finance Act
1981 substitutes new Sections 20, 21, and 22 to the
Finance (Miscellaneous Provisions) Act 1968. Section
21(2), in its substituted form, provides that if it appears
to the Revenue Commissioners that a person, entitled to
any consideration or other amount chargeable to tax
under Section 20, is non-resident, they may direct that
Section 434 of the Income Tax Act 1967 will apply to
any payment forming part of that amount.
In layman's
terms, this means that the purchase of property from a
non-resident Vendor could give rise to a charge to tax in
the hands of the purchaser of 35% of the price paid.
This puts the client (and his adviser) in an impossible
position as:-
1) there is absolutely no provision in the legislation for
obtaining an advance clearance that the Section will not
apply to the purchaser
2) even worse, the purchaser has no reliable means of
finding out if the person chargeable to tax under Section
20 is non-resident. He may be buying from a resident
Vendor but, because of some "behind the scenes"
transactions, the person chargeable to the tax could be
non-resident, and
3) if it transpires that, subsequent to completion, a
charge under Section 434 is made against the purchaser
he has no obviops means of recovery against the person
chargeable to tax. An indemnity has obvious limitations
in this type of situation.
Obviously, some limitation has to be put on the pratical
operation of the Section or some advance prodecure for
clearance will have to be worked out with the Revenue.
I am asking the Gazette to publish this letter as a
warning to colleagues, and I am at the same time
strongly urging the Society (to whom I am sending a
copy) to take the matter up with the Revenue
immediately and work out some agreed postion as a
guide to its members.
On a wider basis, I would urge also that the Society
make immediate representations to the Minister for
Finance with a view to preventing the introduction of
further such items of outrageous legislation.
Yours sincerely
John F. Condon
9/10 Ely Place,
Dublin 2.
(See Note on this subject on page 17.)
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