811A Transactions to avoid liability to tax: surcharge, interest and protective notification

Summary

This section ensures that, where the opinion of the Revenue Commissioners that a transaction is a tax avoidance transaction which was commenced on or before 23 October 2014 becomes final, interest and a 20% surcharge will be payable on the tax that the taxpayer unsuccessfully attempted to avoid paying. The section also provides that, by making a protective notification to Revenue in respect of a transaction within 90 days of beginning a transaction, the taxpayer can, on a wholly non-prejudicial basis, obtain protection from the possibility of such interest or surcharge arising in the event of Revenue successfully challenging the transaction. In addition, where a full protective notification has been made, the time period within which Revenue must form an opinion that a transaction is a tax avoidance transaction under section 811 is limited to a period of two years from the date of the notification. An opinion under section 811 can otherwise be formed at any time.

Details

(1) Provision is made to ensure that —

1. refunds by a taxpayer of tax repayments received on foot of avoidance will be treated as additional tax payable for the purposes of the surcharge,
2. the date on which Revenue’s opinion that a transaction is tax avoidance, will be treated as becoming final, will be —
   1. 31 days after the notice of opinion, where no appeal under section 811(7) is made, or
   2. the date upon which all appeals against an opinion are dismissed,
   
   and
3. this section is to be construed together with section 811.

(1A) The general four year restrictions relating to the raising of assessments, the making of enquiries or the taking of actions by an inspector provided for in sections 959Z, 959AA or 959AB (which gives primacy to these provisions over any other provisions of the Tax Acts, except where otherwise expressly provided) shall not be construed as preventing Revenue from making any enquiry or taking any action at any time in relation to section 811 or section 811A. This copper-fastens the provisions of section 811(4)(a) which provides for Revenue forming an opinion that a transaction is a tax avoidance transaction at any time, and allows Revenue to make enquiries about a transaction contained in a tax return or referred to in a protective notification at any time.

(1B) Where a “valid” protective notification from or on behalf of a person of full details of a transaction has been received, Revenue may not form the opinion that the transaction is a tax avoidance transaction under the provisions of subsections (2) and (4) of section 811 after a period of 2 years from receipt of the protective notification, so long as it is received on or before the relevant date. The two year restriction on the formation of an opinion shall not prevent Revenue from making an enquiry in relation to a transaction under section 811 or 811A at any time.

(2) Where Revenue’s opinion that a transaction is avoidance becomes final (i.e. if there is no appeal or the appeal is withdrawn by the taxpayer, if the taxpayer and Revenue come to an agreement, or if the appeal is finally determined by the Appeal Commissioners or the Courts against the taxpayer) —

1. a 20% surcharge will apply to the tax becoming payable, and
2. interest will be applied by reference to when that tax would have been payable if there had been no avoidance.

(2A) This section, as amended by the Finance Act 2014, provides an opportunity to persons who had engaged in tax avoidance to come forward to Revenue, before 30 June 2015, and settle their affairs in such a way that no surcharge will apply and any interest payable will be capped at 80% of the interest otherwise so payable. To do this, they must make a qualifying avoidance disclosure. A qualifying avoidance disclosure, must be in writing, must contain full details of the transaction and must be signed. It must also be accompanied by full payment of the tax and any interest due.

This settlement opportunity is available to persons who had entered into a transaction and either the Revenue Commissioners had formed the opinion that the transaction was a tax avoidance transaction or the Revenue Commissioners could have successfully challenged the transaction by forming an opinion under section 811 that it was a tax avoidance transaction.

(3)(a) Neither a surcharge nor interest will apply where a “protective notification”, giving full details of the transaction has been received by the Revenue Commissioners by the relevant date (set out in paragraph (c)).

(3)(b) Where a “protective notification” has been received it will be treated as being made —

1. solely to prevent the imposition of the surcharge and interest, and
2. without prejudice to whether the transaction is a tax avoidance transaction or not.

(3)(c) The dates by which “protective notifications” have to be received, are set out.

(3)(c)(i) If the transaction (or any part of it) was undertaken on or after 19 February 2008 then the relevant date is the later of —

1. 90 days after the transaction commenced, or
2. 19 May 2008.

(3)(c)(ii) Where a transaction is undertaken wholly before 19 February 2008 and the tax advantage arises by virtue of one or more transactions carried out on or after 19 February 2008, then the relevant date is 90 days after the date on which those latter transactions commenced.

(3)(c)(iii) Where a transaction is undertaken wholly on or before 19 February 2008 and gives rise to a refund that could first have become so refundable on a date on or after 19 February 2008, the relevant date is 90 days after that date.

(3)(d) Notwithstanding paragraph (a), interest will apply to any unpaid tax with effect from the date from which the Revenue opinion (that the transaction is a tax avoidance transaction) becomes final and conclusive.

(4)(a) For the purpose of charging interest, Revenue must specify in its notice of opinion under section 811 the date or dates from which tax would have been due and payable if there had been no attempted avoidance.

(4)(b) The taxpayer is entitled to appeal against the specification by Revenue of the date or dates referred to in paragraph (a).

(5) The surcharge is payable when the Revenue opinion becomes final and interest is charged from that date in respect of any delay in payment.

(6)(a) The protective notification is required to be delivered in a prescribed form, to the Revenue office specified on the form. The notification must contain full details of the transaction, full reference to relevant tax law, and details of how that tax law is considered to apply to the transaction.

(6)(b) The use of the “expression of doubt” procedure will not be regarded as representing a protective notification. Protective notifications do not involve or imply any doubt on the part of the taxpayer. They are a provision of information to Revenue to protect against any possibility of surcharge and interest, and to protect against the application of the changed appeal provisions.

(6)(c) The taxpayer has the right to appeal in the event of Revenue contending that a full and timely notification was not made.

(6A) The Revenue Commissioners may nominate any of their officers to carry out their functions under the section.

(7) This section applies to transactions wholly or partly undertaken on or after 19 February 2008 and to transactions wholly undertaken before that date where they have the effect of reducing liabilities or causing repayments after that date, unless a protective notification had been made before 19 February 2008 under the provisions of section 811A as they applied prior to that date.

(8) This section does not apply to a transaction which was commenced after 23 October 2014. The section does not need to apply to transactions after that date because it is being replaced in its entirety by section 811D.

Relevant Date: Finance Act 2021