Revenue Tax Briefing

The content shown on this page is a Tax Briefing produced by the Irish Revenue Commissioners. To view the section of legislation to which the Tax Briefing applies, click the link below:

Revenue Tax Briefing Issue 45 (part 2), 2001

Offset of Repayments Regulations

Offsetting or Withholding of Repayments or Overpayments

Introduction

Section 1006A TCA 1997 provides that, where a customer is due a repayment (this includes a repayment arising as a result of an overpayment), Revenue may

  • Offset the repayment if the customer has an outstanding liability or
  • Withhold making the repayment if the customer has a return outstanding.

The Section provides that where a decision is taken by Revenue to offset or withhold a repayment the customer must be advised in each case.

The Revenue Commissioners recently signed the Taxes (Offset of Repayments) Regulations 2001 (SI 399 of 2001) which set out the order of offset where Section 1006A is applied. These Regulations came into effect on 14 September 2001 with the introduction of ASC taxes into the Integrated Taxation Processing system (ITP) (see page8 in this Tax Briefing).

The purpose of this Article is to set out the practical arrangements that are being applied by Revenue in operating Section 1006A.

Context

Despite the recent legislation, offsetting is not a new phenomenon. Revenue has for many years accepted customer requests to use a tax repayment for one period to meet a separate tax liability in another period or taxhead. The latest legal changes are simply intended to build on the existing system by providing a more consolidated offsetting operation in the context of ITP, while at the same time ensuring a more effective response to defaulting taxpayers. Despite the legal changes, the basic rule that has always existed continues to apply – if the customer wishes a repayment to be applied in a certain way Revenue is happy to comply with that request.

There is also no change to the situation where an overpayment entitles a customer to an interest payment - the customer will continue to receive the interest payment.

Offsetting/withholding within ITP

ITP now provides a consolidated collection approach to VAT, employer’s PAYE and, just recently, IT, CT and CGT. This consolidation provides the opportunity to carry out checks across these taxheads. In practice, where a repayment arises for a customer in any of these taxheads ITP

  • Checks across taxheads in ITP for outstanding liabilities/returns
  • Offsets if there is a clear liability
  • Withholds repayment if there is a return clearly outstanding
  • Advises the customer in each case if the repayment is offset or withheld; otherwise issues the repayment.

It is important to stress that offsetting within ITP only arises if there is a clear liability outstanding. Similarly, withholding of a repayment only arises where a return is clearly outstanding. In order to ensure this a series of control parameters have been built into ITP.

ITP does not carry out an offset if:

  • The outstanding liability is small
    • £800 in IT, CT or CGT
    • £250 for employer’s PAYE from 1995/96 to 1999/00
    • £100 otherwise
  • The outstanding liability is old
    • Old in this context means pre 1995 (this will be rolled forward each year)
  • The outstanding liability is in dispute or subject to appeal
  • The outstanding liability is covered by an agreed payment arrangement (instalment)
  • The outstanding liability is a current VAT or employer’s PAYE estimate
    • Current in this context means the estimate relates to the most recent two periods
  • The repayment relates to IT, CT or CGT and is less than £800

ITP does not withhold a repayment unless:

  • In the case of VAT, the return is outstanding for at least one month
  • In the case of employers PAYE, the P35 return is outstanding for at least two months
  • In the case of IT or CT, the return is outstanding for at least two months.

Offsetting/withholding by caseworker

Where a caseworker is in contact with a customer (because a particular problem has to be resolved) the monetary/time parameters outlined are not applied because contact with the customer establishes the precise agreed position in that case. However, the same basic principles apply and offsetting will not be carried out if:

  • The liability is in dispute or subject to appeal
  • The liability is subject to an agreed payment arrangement (instalment)

and repayments will not be withheld unless returns are clearly overdue.

Taxheads outside ITP

There are a number of taxes still outside ITP and the provisions of Section 1006A are only applied in relation to those cases in specific instances where there is caseworker contact with the customer. These taxheads are

  • Relevant Contracts Tax (shortly to be brought within ITP)
  • Excise duties
  • Capital Acquisitions Tax
  • Stamp Duties
  • Residential Property Tax
  • Vehicle Registration Tax.

Order of offset

As indicated above, the Taxes (Offset of Repayments) Regulations 2001 set out the order of offset to be applied. The rules as set out in the Regulations are:

  • Offset in accordance with the customer’s wishes
  • Offset within the taxhead where the repayment arises
  • If more than one liability in the same taxhead, oldest liability first (for this purpose only, an interest liability is regarded as having the same due date as the tax liability in respect of which it arises)
  • Offset to liabilities at enforcement only if no other liability is outstanding.

The order of offsetting across taxheads (other than where the repayment arises in respect of CT, IT or CGT) is as follows:

  • Within the taxhead where the repayment arises
  • Value Added Tax
  • Employer’s PAYE
  • Relevant Contracts Tax
  • Corporation Tax
  • Income Tax
  • Capital Gains Tax
  • Residential Property Tax
  • Capital Acquisitions Tax
  • Stamp Duties
  • Vehicle Registration Tax
  • Excise Duty.

The order of offsetting across taxheads where the repayment arises in respect of CT, IT or CGT is as follows:

  • Within the taxhead where the repayment arises
  • Corporation Tax
  • Income Tax
  • Capital Gains Tax
  • Value Added Tax
  • Employer’s PAYE
  • Relevant Contracts Tax
  • Residential Property Tax
  • Capital Acquisitions Tax
  • Stamp Duties
  • Vehicle Registration Tax
  • Excise Duty.

Misappropriated payments

It is a cause of some regret that there continues to be an unacceptable level of payments that are misappropriated. The single biggest contributor to this problem is agents and customers using payslips for the wrong customer or the wrong period. Revenue would like to renew previous appeals – if a customer or agent does not have the correct payslip for the payment do not “doctor” another payslip. Instead send the payment with a covering letter clearly stating the name and tax reference number and the taxhead and period to which the payment is to be applied.

For simplicity, Revenue will continue to treat misappropriated payments as such and, where such problems come to attention, these will be corrected by transferring the payment to where it was originally intended (rather than applying the ordering rules set out above).

Further information

Any further information required in relation to the offsetting arrangements can be obtained from Technical Services Section, Office of the Collector-General, Sarsfield House, Francis Street, Limerick (Phone 1890 20 30 70). Questions in relation to individual cases should continue to be addressed to the caseworker dealing with the case.