The Gazette 1991

g a z e t t e

a p r i l 1991

Solicitor's Duties under the CAT Amnesty

In his Budget Speech on 30 January 1991, the Minister for Fin- ance announced an Amnesty in respect of interest and penalties for outstanding Capital Acquisitions Tax and Estate Duty. In effect, this is almost identical to the Income Tax Amnesty of 1988 which was such a resounding success in gathering tax and in finalising many problems where the taxpayer, through lack of accounts or what- ever, had been in default or claims for tax had lain dormant for many years. The Amnesty gives a final oppor- tunity to taxpayers to settle out- standing Capital Acquisitions Tax and Estate Duty liabilities by 30 September next, without the pay- ment of a great bulk of the interest or penalties. There are, however, certain conditions attaching to the granting of this amnesty:- 1. A self-assessment return must be completed; 2. The return must be sent to the Revenue Commissioners with a cheque for payment of the out- standing tax; 3. Any other Capital Acquisitions Tax outstanding at the time of payment must also be paid; 4. A letter accompanying the re- turn and payment must apply for the waiver of interest and penalties. As stated earlier, this affords a final opportunity to taxpayers to put their affairs in order before the Revenue introduce new stringent enforcement measures with effect from 1 October. These new string- ent enforcement measures will be taken from the Income Tax Code and include: (a) Powers for the Revenue Com- missioners to attach certain financial accounts of the taxpayer (Sec. 73 FA 1988); (b) The use of Revenue Sheriffs to attend the taxpayer at his home or business and to levy the tax and penalties, if not in cash, by distraint; (c) Adoption of the audit proced- ures in relation to Capital Ac-

quisitions Tax claims and to examine in detail, including a visitation from the appropriate officer of the Revenue Com- missioners, all returns made and to inspect property, not only real property, to confirm the accuracy of those returns. It is the duty of every solicitor to bring this tax amnesty to the attention of his clients to make them aware that if they have at any time received a gift or an inherit-

cumstances which might apply to that particular client and, by way of reminder, some of the areas might be: (1) Sale of land at an undervalue. (2) Sale of shares in a family company at an undervalue. (3) Interest free loans or loans at less than a commercial rate of interest. (4) Interest free loans to family companies. (5) Passing of family heirlooms to the next generation before death, e.g. jewellery, antique furniture etc. (6) Purchase of a car for a child or grandchild. (7) Payment of the deposit on the purchase of a house for a child or grandchild. (8) Capital injection into family companies. (9) The issue of shares to family members on the set up of a family company. (10) The placing of assets into joint names. The above list is not exhaustive and it is up to every solicitor to familiarise himself with the circum- stances which could give rise to a claim. Another area of concern to the solicitor must be professional in- demnity, whether through the Solicitor's Mutual Defence Fund or through independent insurance. Many claims against the Defence Fund (and probably in respect of independent insurance companies) are caused by the solicitor's negligence in dealing with tax matters, particularly those tax matters which are endemic to his profession, namely, gift tax and inheritance tax. There are a number of ways in which a solicitor may have failed his client in dealing with tax: (i) Failure to identify a claim for tax. (ii) Failure to deal with a claim for tax.

By Brian Bohan Solicitor

ance or made a gift and full dis- closure has not been made to the Revenue Commissioners, either through ignorance or the client being afraid that a tax liability will attach to the benefit, it is necessary to formalise this situation for the client and, if tax is due, to advise full compliance within the amnesty. It may not always be obvious to clients whether a gift has taken place and for that reason it might "It is the duty of every solicitor to bring this Amnesty to the ettention of his clients . . . " be necessary, depending on the cir- cumstances of each client, to en- umerate certain instances where such events might have taken place. CAT legislation targets gifts taken as a source of gift tax. It may be obvious to a client, where an inher- itance is taken, that a liability to tax will or may exist, but gifts are separate from these and they may not always be obvious. Gifts can take many forms. For example, a parent might sell land to a child at an undervalue and of course the difference in value is a gift. It may be easy for the solicitor to enumerate to his clients the cir-

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