960P Bankruptcy: priority for taxes

Summary

This section deals with the priority attached to certain taxes owed to the Revenue Commissioners where an individual becomes bankrupt.

Details

(1) Terms used in the section (i.e. “Act of 2010”, “Act of 1988” and “relevant period”) are defined.

(2) Capital gains tax and local property tax are deemed to be included for the purposes of section 81(1)(a) of the Bankruptcy Act 1988, which gives priority over all other debts to income tax assessed on a bankrupt.

(3) The priority attaching to the taxes to which section 81 of the Bankruptcy Act 1988 applies also applies to VAT (and interest on that tax), arrears of PAYE owed by an employer, arrears of relevant contracts (i.e. subcontractors) withholding tax under Chapter 2 of Part 18 and regulations made under that Chapter and arrears of tax due under PAYE assessments made under section 990 for the 12-month period ending before the date on which the order for adjudication of the person as a bankrupt was made, the petition of the arrangement of the person as a debtor was filed or the person died insolvent.

(4) Where arrears (other than arrears of VAT and interest and arrears of PAYE owed by an employer) are for a period that straddles the relevant 12-month period, only the amount of the tax apportioned on a time basis falling within that 12-month period is to be treated as preferential.

(5) The employer’s liability for a period of 12 months includes all tax which the employer is obliged to deduct under the PAYE system from emoluments paid to employees during that period, reduced by any repayments which the employer is required to make under the PAYE system in that period, together with any interest payable in respect of that tax.

Relevant Date: Finance Act 2021