Returns to be made by Intermediaries in the Financial Services area

Introduction

Section 230 Finance Act 1992 requires persons who act in the State as intermediaries in, or in connection with, the opening of a foreign bank account, to provide certain details of the transaction to the appropriate Inspector of Taxes. It should be noted that the requirement is not confined to Financial Institutions. Self-assessment principles apply i.e. the intermediary must provide the details whether or not requested to do so by an Inspector. Practitioners will be already familiar with returns of these details on Form 8B.

New Legislation

The section has subsequently been extended by Section 24, Finance Act 1993 and Section 41, Finance Act 1995. The intermediaries affected are:

• Persons who act as intermediaries in, or in connection with, the issue of a life assurance policy or the making of a deferred annuity contract by a company which is not resident in the State or not chargeable under Case III in respect of the income from the investment of its life assurance fund (Section 20A Capital Gains Tax Act 1975 as inserted by Section 24, Finance Act 1993
• Persons who act as intermediaries in or in connection with the acquisition of a material interest in an offshore fund (Section 230A Finance Act 1992 as inserted by Section 41 Finance Act 1995).

A material interest in an offshore fund is defined in Section 65 Finance Act 1990. Briefly, it is an interest in an investment vehicle which is either a non-resident company, a unit trust the trustees of which are not resident in the State or an arrangement under the laws of a foreign territory which creates rights in the nature of co-ownership.

Although the income tax charge which applies in relation to the disposal of a material interest in an offshore fund applies only to non-distributing funds, the reporting requirement applies to acquisition of material interests in all offshore funds.

Return Filing

The return requirement, in such cases, applies to services provided in the year 1995/96 where the intermediary is within the charge to income tax and to accounting periods ending on or after 1 June 1995 where the intermediary is within the charge to Corporation Tax. Accordingly, for intermediaries chargeable to income tax, the first return is due by 31 January 1997.

To whom should the return be made?

The return must be made to the ‘appropriate Inspector’ who is defined in Section 230 Finance Act 1992 as :

• the inspector who has last required the intermediary to deliver a return of income
  or
• where there is no such inspector, the inspector to whom the intermediary usually delivers such a return
  or
• where there is no such Inspector, The Inspector of Returns, Ms. Eileen O’Sullivan, Dublin Tax District, 1A Lr. Grand Canal St., Dublin 2.

Persons likely to be intermediaries

An intermediary for the purposes of the legislation is a person who provides services as an intermediary in the ordinary course of a trade carried on in the State.

It should be noted that the definition of intermediary is very wide. It is not necessary that the intermediary be involved in the opening of a foreign account or the acquisition of the foreign life policy etc. All that is required us that the intermediary acts in connection with the transaction. Nor is the section confined to recognised providers of financial services. Any person who in the ordinary course of a trade carried on in the State provides a service as an intermediary is obliged to make a return. For example, auctioneers and accountants who provide an investment service as an ancillary to their core business would be considered to be intermediaries for the purposes of the legislation.

Intermediaries should ensure, when providing such services, that they obtain the information necessary to make a full return (name, address and tax reference number of the client etc.). The legislation obliges the client to supply this information to the intermediary (Section 230(3) Finance Act 1992).

Statutory penalties apply for:

• the failure to make a return,
• the making of a false return, or
• helping to make a false return.

Further information

Return forms will be available shortly from local tax offices.

Intermediaries wishing to make a return in some electronic medium should contact.

Office Systems Group

Computer Branch,

Office of the Chief Inspector of Taxes,

3rd Floor, Setanta Centre,

Nassau Street, Dublin 2

Fax No. (01) 671 1653,

regarding specifications.

Any other queries in relation to the return making requirements should be addressed to the local tax office.