Revenue have issued their definition of chargeable person for the 2005 Tax year and operative for the 2006 filing dates

The new category of chargeable person is highly significant, as it will bring many taxpayers currently filing under the Form 12 process into the self-assessment regime, with the attendant possibilities of surcharge and audit.

The main point, as set out by Revenue in Tax Briefing Issue 62 is as follows:

“An individual who is in receipt of income chargeable to tax under the PAYE system but who is also in receipt of substantial gross income from other sources, such as trading, professional or rental income, which is covered or largely covered by losses, capital allowances and other reliefs will now be regarded as a ‘chargeable person’ within the Self-Assessment system.

For the 2005 tax year and subsequent years of assessment, substantial gross income is defined as gross non-PAYE income of €50,000 or more, e.g. Gross Income from a Trade or Profession, Gross Rental Income, Other Schedule D Income, Dividends and Distributions or Foreign Income.

The €50,000 limit applies to gross income from all sources and not from each separate source. An individual may have non-PAYE income from a number of sources and all sources should be added together when determining this €50,000 threshold.

An individual becoming a ‘chargeable person’ under Section 14 FA 2005 continues to be a ‘chargeable person’ for future years, as long as the source(s) of the non-PAYE income continues to exist, irrespective of the amount of the annual gross income.

Individuals with gross non-PAYE income of €50,000 or more (even if the non-PAYE income is reduced to NIL for tax purposes) are required to prepare and deliver, on or before 31 October each year, a Form 11 tax return for the previous year ended 31 December. Where a return is submitted after 31 October the individual will be subject to the late-filing surcharge on the same basis as all other ‘chargeable persons’.

In these cases, the non-PAYE income can not be coded against tax credits.”

Accountants should review their client lists to establish if any clients are now brought within the Form 11 process.