Revenue Note for Guidance

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Revenue Note for Guidance

CHAPTER 3

Mandatory disclosure of certain transactions

Overview

This chapter introduces a new mandatory disclosure regime for certain types of tax avoidance arrangements. The main features of the regime can be summarised as follows:

  • Certain persons, normally the promoters of schemes, will be required to provide Revenue with information about schemes and proposals for schemes where a tax advantage is one of the main benefits of the scheme and where it falls within certain specified descriptions.
  • Disclosure will be on a non-prejudicial basis, in that schemes disclosed may or may not turn out to be tax avoidance schemes that the Minister for Finance, the Government and the Oireachtas may want to close down. There will be no presumption or inference that a transaction/scheme disclosed under the mandatory disclosure regime is a tax avoidance transaction. Equally, the fact that a transaction may not come within the disclosure requirements cannot be regarded as an indicator that the scheme is not a tax avoidance transaction.
  • In making a disclosure, the promoter will be required to explain how the scheme is intended to work and must do so within tight deadlines i.e. within a very short period of first marketing the scheme or making it available to clients/users.
  • For the most part, promoters are likely to be accountants, solicitors, banks and financial institutions, along with small firms of specialist promoters.
  • Where the promoter is offshore, the scheme must be disclosed by the client/user.
  • Where the scheme is an “in-house” scheme i.e. designed by, say, a company for its own use such that there is no “promoter”, the company must disclose the scheme.
  • Where legal professionals are involved, they are not required to breach legal professional privilege (LPP), but where a claim to LPP can be maintained the onus for disclosure in such cases falls on the user of the scheme and the legal professional must inform the user of this obligation and must tell Revenue of his/her non-compliance with the disclosure requirement. Where legal professionals do not disclose on the basis of an incorrect or invalid assertion of LPP they may be liable to civil penalties for non-disclosure.
  • Taxpayers who enter into disclosable transactions are required to include the Transaction Number on their income tax or corporation tax return, or if no number was assigned to a transaction, to provide Revenue with complete details of the transaction.
  • Certain “information seeking” provisions are included to allow Revenue to make, for example, a “pre-disclosure enquiry” where they have reasonable grounds for believing that a person is a promoter of a scheme that may be a disclosable scheme and to follow up on cases of partial disclosure.
  • Revenue may also seek information from a “marketer” (i.e. an intermediary) involved in a scheme as to who the actual promoter of the scheme is.
  • If a marketer is marketing a scheme which it would be reasonable to believe was a disclosable transaction and for which the marketer has not been given a transaction number, then that marketer must provide Revenue with any information that Revenue could reasonably require in relation to the scheme.
  • Promoters are required to inform Revenue, on a regular basis, of whom they have made schemes available to for implementation.
  • Penalties are provided for failure to meet the disclosure requirements which are to be imposed by the courts in all cases and, because of the damage that nondisclosure of a scheme could do in terms of loss of tax revenue to the Exchequer, flexibility is given to the courts in terms of the absolute amount of penalty that may be imposed.
  • Revenue may make regulations with the consent of the Minister for Finance in relation to various aspects of the Mandatory Disclosure regime.
  • Revenue may also seek a determination from the Appeal Commissioners in respect of certain aspects of the disclosure requirements.

817D Interpretation and general (Chapter 3)

Summary

This section is concerned with the interpretation of certain terms used in this Chapter.

Details

Definitions

(1) “disclosable transaction” is defined as including any transaction or any proposal for any transaction (i.e. an existing scheme where offered to a person for implementation on or after the date of passing of the Finance Act 2010 (3 April 2010) or any proposal for a new scheme arising on or after that date) that meets certain “filters” i.e. it must enable, or be expected to enable, a person to obtain a tax advantage; the tax advantage must be the main, or one of the main, benefits of the transaction and it must fall within a specified description (which has the meaning assigned to it by section 817DA). A transaction is disclosable whether it is a “bespoke” transaction (designed for a particular person) or an “off-the-shelf” transaction (marketed with no specific client in mind).

“marketer” means a person who is not a promoter but who has made a marketing contact in relation to a disclosable transaction. Essentially it means an intermediary or introducer who brings potential clients and promoters together with a view to the clients availing of a marketed scheme.

“marketing contact” is defined as the communication by a person of the general nature of a scheme to another person with a view to that person, or any other person, considering whether to get further details of the scheme or to have it made available for implementation.

“promoter” is defined broadly to include any person, who, in the course of a relevant business, is responsible for the design, marketing, organisation or management of a scheme or who makes a scheme available for implementation by another person.

“relevant business” means a trade, profession, vocation or business which includes the provision of tax services to other persons or which is carried on by a bank (as defined).

“relevant date” means the earliest of three possible dates i.e. the date the promoter has specified information about the scheme and makes a marketing contact, the date on which the promoter makes the transaction available for implementation by another person or the date the promoter first becomes aware of any transaction forming part of the disclosable transaction having been implemented.

“specified date” is defined as, in relation to a promoter meaning the relevant date, and in relation to anyone else, meaning the date the person first enters into the disclosable transaction.

“specified information” is defined in subsection (2).

“tax advantage” is defined broadly to include any advantage arising from a reduction, deferral or avoidance of any assessment, charge or liability to tax, or any relief from, or refund of tax, or the avoidance of any obligation to deduct or account for tax.

“transaction” is defined broadly to cover all types of arrangements and devices.

(2)(a) The specified information which must be provided includes such information as might reasonably be expected to enable a Revenue officer to understand how a transaction is intended to operate. It includes:

  • Details of the obligation created by the Mandatory Disclosure regime under which the information is being provided,
  • A summary of the transaction, and if it is known by a name, that name,
  • Details of the provisions of the Acts that are relevant to the transaction, and
  • Full details of the transaction explaining each element, and setting out how the tax advantage is expected to be obtained.

(2)(b) Specified information, in the context of a promoter, includes the name, address, telephone number and tax reference number of the promoter.

Specified information, in the context of all persons who have a duty to disclose a transaction because there is an offshore promoter or a promoter that is asserting legal professional privilege, or where a marketer is involved, includes the name, address, telephone number and tax reference number of the person and the name, address and telephone number of the promoter.

Specified information, in the context where there is no promoter, includes the name, address, telephone number and tax reference number of the person.

Relevant Date: Finance Act 2021