Revenue Note for Guidance
This section authorises the Revenue Commissioners to offset a repayment of tax and interest due to a person in respect of such a repayment against any outstanding tax liability of the person before making a repayment. Repayment can also be withheld pending the submission of any outstanding tax returns. Where a repayment is so withheld, interest is not payable for the period that such repayments have been withheld. The section also contains an anti-avoidance provision relating to the assignment of a repayment to another person.
(1) Terms used in the section are defined, viz.
“claim” means a claim, or part of a claim, that results in either or both a repayment of tax and a payment of interest payable in respect of such a repayment.
“liability” means any tax (including interest) due or estimated to be due for any period or in respect of any event, as appropriate.
“overpayment” means a payment or remittance, which exceeds the amount of the liability against which it is credited.
(2) Where either a payment of any liability of a person is outstanding or tax returns are outstanding, or both, then where a repayment is due to the person in respect of a claim or overpayment —
(3)(a) Where a person has assigned, transferred or sold a right to a claim or overpayment and tax is due and payable by that person, the assignment, transfer or sale of that right is ignored. In other words, Revenue can offset the repayment against any tax liability owed by the person who assigned, transferred or sold his or her right to a claim or overpayment. This counters the avoidance opportunity that arises as a result of a decision, in 2008, of the Court of Appeal in the UK (Commissioners of Revenue and Customs v Midlands Co-operative Society), where it was held that a right to make a claim for VAT that had been overpaid can be assigned to another person. The avoidance opportunity arises where, for example, a company assigns a right to an overpayment of tax to a company connected to it in order to avoid the provisions of subsection (2).
(3)(b) Where the first-mentioned person and the second-mentioned person referred to in subsection (3)(a) are connected persons (within the meaning of section 10), any balance due to the first-mentioned person is offset against tax due and payable by the second-mentioned person.
(4) Where the Revenue Commissioners have either withheld or set off a repayment by virtue of subsection (2) or (3), a notice in writing shall be given to the person concerned and, in circumstances where only a return is outstanding, interest will not be payable by the Revenue Commissioners from the date the notice is given.
(5) The Revenue Commissioners are required to make regulations to give effect to the section. Such regulations are to set the order of priority of outstanding liabilities against which any claim or overpayment is to be set.
(6) Regulations made under the section are required to be laid before Dáil Éireann and may be annulled by the Dáil within 21 days by a resolution. This is, however, without prejudice to anything already done under the regulations.
(7) The Taxes (Offset of Repayments) Regulations 2002 (S.I. No. 471 of 2002) have effect as if they were made under subsection (6).
Relevant Date: Finance Act 2020