Finance Bill 2018 provides for a number of changes to the operation of the Employment Investment Incentive (“EII”). One of these is putting the claims on a self-assessment basis, with the company responsible for judging whether or not it meets the company conditions, and the individual investors responsible for judging whether or not they meet the investor conditions.
Under the proposed changes, the company will give the investor a “statement of qualification”, attesting to the fact that the company meets the company conditions. That statement is treated as a tax return filed with Revenue. Having received a “statement of qualification”, the investor will then claim the relief from Revenue. If the statement of qualification is incorrect, penalties could apply to it as they would to a tax return filed by the company. If the investor makes an incorrect claim for relief, other than because they were given an incorrect statement of qualification, then penalties may arise.
- Section 1077E of the Taxes Consolidation Act 1997 (TCA) sets out penalties for deliberately or carelessly making incorrect returns or failing to make returns.
- Section 1077E (2) provides that where a person deliberately makes an incorrect return, declaration, claim, statement or accounts to Revenue, that person will be liable to a penalty. The maximum penalty for tax defaults under this subsection is 100% of the tax underpaid.
- Section 1077E (5) provides that where a person carelessly (but not deliberately) delivers an incorrect return, makes an incorrect statement, claim or declaration or submits incorrect accounts, that person will be liable to a penalty. The maximum penalty for tax defaults under this subsection is 40% of the tax underpaid, or 20% of the tax underpaid if the underpayment is 15% or less of the person’s overall liability to tax for the period.
Revenue have informed me that, in both cases, the penalty shall be mitigated if the person who made the incorrect return, declaration, claim, statement or accounts co-operates with Revenue and/or makes a prompted or unprompted qualifying disclosure.
I am further advised by Revenue that reviews of both the “statement of qualification” and the individual’s claim for relief will be carried out in accordance with the Code of Practice for Revenue Audit and other Compliance Interventions.