Dáil Éireann Debate, Wednesday - 23 January 2019
77. Deputy Michael McGrath asked the Minister for Finance the potential penalties for a company and an investor if they incorrectly apply for EIIS following changes in Finance Act 2018; if there are interest or penalties incurred; and if he will make a statement on the matter. [3255/19]
View answerSection 25 of Finance Act 2018 provides for a number of changes to the operation of the Employment Investment Incentive (“EII”) in the Taxes Consolidation Act 1997 (TCA) .
One of the changes 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. There are therefore two applicants under the newly designed scheme:
1. 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.
2. Having received a “statement of qualification”, the investor then claims the relief from Revenue.
If that statement of qualification is incorrect, penalties can apply to it as they can apply 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 508U of the TCA (as amended by Finance Act 2018) provides that in circumstances whereby the investor could not have known that the company was not a qualifying company, the withdrawal of the relief will occur by the making of an assessment against the qualifying company. The liability will fall to the company not the investor.
Section 508V provides in circumstances whereby the investor could or would have known that the company was not a qualifying company, the withdrawal of the relief will occur by the making of an assessment against the investor. The liability will fall to the investor.
Section 1077E 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.
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 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. This can be found on the revenue website:
https://www.revenue.ie/en/self-assessment-and-self-employment/code-of-practice-and-compliance/index.aspx.
