Revenue Note for Guidance

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Revenue Note for Guidance

53 Surcharge for under-valuation of property

Summary

This section imposes a surcharge in respect of any substantial under-valuation of the value of an asset which is comprised in a gift or inheritance and which is included in a return delivered by an accountable person. The surcharge consists of a specified percentage depending on the degree of the under-valuation (i.e. 30%, 20% or 10%) of the tax ultimately attributable to the undervalued asset. The rights of appeal contained in the capital acquisitions tax legislation will apply in ascertaining the value of any asset on which the surcharge is based.

Details

(1) “ascertained value” means the market value of property subject to the right to appeal under section 66 or 67.

(2) Where an accountable person delivers a return and, in the opinion of the Revenue Commissioners, his/her estimate of the market value of any asset in the return is less than 67% of the ultimate ascertained value of that asset, a surcharge will become payable as set out in the Table. Where the value of the asset included in the return by an accountable person expressed as a percentage of the value of that asset when ultimately ascertained is—

  • equal to or greater than 0% but less than 40%, the surcharge will be 30% of the tax ultimately attributable to that asset;
  • equal to or greater than 40% but less than 50%, the surcharge will be 20% of the tax ultimately attributable to that asset;
  • equal to or greater than 50% but less than 67%, the surcharge will be 10% of the tax ultimately attributable to that asset.

Example

A delivers a return in respect of a house devised to him by his brother. The market value of the house is ascertained by the Revenue Commissioners at €150,000 under section 26. The tax ultimately payable on the valuation of €150,000 is €24,000.

If the value of the house shown in the return delivered by the brother of the deceased person—

is €105,000, that €105,000 is 70% of €150,000, and no surcharge is involved;

is €75,000, that €75,000 is 50% of €150,000, and the surcharge is 10% of €24,000 = €2,400;

is €60,000, that €60,000 is 40% of €150,000, and the surcharge is 20% of €24,000 = €4,800;

is €45,000, that €45,000 is 30% of €150,000, and the surcharge is 30% of €24,000 = €7,200.

If a taxable inheritance taken by A consists of a house valued at €150,000, €10,000 cash and private company shares, whose value is ascertained by the Revenue Commissioners at €30,000, making a total taxable value of €190,000 on which the tax is €32,000, any surcharge which might arise in connection with the valuation of the house would be based on the amount of tax attributable to the property which is that house.

The amount of tax attributable to the house in this example is €25,263, being—

€ 150,000

€ 32, 000 ×

€ 190,000

(3) A surcharge is liable to interest at the rate or rates set out in Part 1 of the Table in section 51(2) (inserted by section 145 of the Finance Act 2005). Any surcharge and interest are chargeable and recoverable as if they were part of the tax.

(4) The taxpayer has a right of appeal to the Appeal Commissioners against the imposition of the surcharge on the basis that he/she had reasonable grounds for his/her estimate of the market value of the asset giving rise to the surcharge.

(5) The usual appeal provisions apply to an appeal under subsection (4), including a right of rehearing in the Circuit Court, and a right of appeal to the High Court on a point of law.

Relevant Date: Finance Act 2015