47 – 49 Pearse Street, Dublin 2

Receivership Tax Consultation,

Fiscal Division,

Department of Finance,

Government Buildings,

Upper Merrion Street,

Dublin 2

9 August 2013

Dear Sir/Madam

Further Consultation on the Tax Implications of Appointing a Receiver

We refer to the invitation for submissions under this consultation.

CCAB-I made a submission under the initial consultation of July 2012 “The Tax Implications of Appointing a Receiver” and in our submission we highlighted the key difficulties of the accountancy profession in dealing with receivership cases and the need for reform of the tax legislation and guidance in this area. We reiterate that such reform is vital to address the uncertainty in the tax treatment of receivership cases. We therefore welcome the opportunity to further consult on this matter and set hereunder our response to the proposals and the accompanying draft legislation contemporaneously addressing the set of consultation questions set out in the Response Document.

Consultation Questions

Question 1

We believe that the proposed approach as set out in the Response Document will contribute towards providing certainty as to the tax obligations of the parties to a receivership. While the thrust of our previous observations are reflected in these proposals, we have reservations about a number of administrative matters and provisions in the draft legislation, or absence of. We request that such concerns are addressed, either by guidance and/or legislation, to achieve the certainty needed in receivership cases. We also recommend that provision is made for multiple receiverships which are not dealt with in the current draft legislation.

Questions 2–6

Considering questions 2 to 6 collectively, our observations concern three key areas:

1. Net receipts
2. Refund mechanism
3. Administration

Net receipts

The definition of 'receipts' in the draft legislation implies that a receiver will account for tax on a cash receipts basis. The legislation implies that there is symmetry with the meaning of 'sum of money expended' however, the meaning of this term is not clear to us.

A further issue arises concerning the deductibility of interest accruing on a loan. The legislation is silent on whether payments allocated by the lender to interest as appropriate under the terms of the loan will be regarded as “money expended” or if it will be necessary to make specific payments to claim a tax deduction for Case V interest.

We also observe that trading deficits are not taken into account; the legislation refers to Case V only under the definition of deficit. We would expect that all Schedule D losses should be covered by this definition.

Refund Mechanism

Our view is that in reality receivers will adopt the prudent approach and operate the proposed flat rate withholding tax. In more cases than not, no tax will be due resulting in a refund of the tax withheld to the receiver. The legislation is deficient on the procedures for issuing refunds.

The legal basis enabling Revenue to share information with a receiver vis-a-vis the tax filing status of the debtor is also unclear. This information is not required by the receiver to file a tax return or facilitate the refund. This leads us to question how receivers will communicate with Revenue regarding the status of refunds. It appears that the borrower will have to file tax returns to obtain the offset (if applicable) and facilitate the refund for the receiver. A further issue arises whereby the ability to obtain a refund is dependent on the debtor being a chargeable person. We believe that this should not be the case.

We are unclear on the treatment of late payments of tax and whether this will preclude the issuing of refunds. We would like to see provision included for dealing with such a position.

Administration

Section 851A TCA 1997 is proposed as a solution for dealing with the information challenges facing receivers and lenders. Revenue is of the view that this section as currently stands is sufficient to enable sharing of borrowers' information. The Response Document refers to capital gains tax only. One of the key challenges for a receiver or lender is to obtain all relevant information about the borrower's tax affairs and this includes information on their income tax or corporation tax history. Receivers also require details of the borrowers personal tax information; particularly their PPSN.

While the proposal to share borrower's capital gains tax information will contribute to improving the information gap we recommend that Revenue's information sharing extends to income tax and corporation tax. We also request that receivers are automatically provided with details of the borrower's PPSN. Such detail is required for several reasons, most notably to satisfy Stamp Duty obligations on the sale of property by a receiver.

We have also identified some more general administrative issues which we feel are more proper to TALC rather than this consultation and therefore we propose to engage with Revenue through this forum on these matters.

Questions 7 and 8

It is difficult to deliberate all possible issues that may arise at this stage. As mentioned, we will consult with Revenue on the administrative issues via the TALC forum.

Question 9

As a general principle it is good practice not to change existing long standing legislation unless absolutely necessary. Maintaining section 571 TCA 1997 intact with the necessary administrative enhancements is in our view the optimal approach. Our main issue with this proposal is the meaning of the terms referenced in the Response Document such as “best endeavours” and “reasonably be regarded”. The document is also vague as to administratively how the information sharing will work.

We trust that these points will be considered when finalising the legislation and also factored into the development of any guidelines and administrative procedures. If you have any queries in regard to the foregoing, please contact Brian Keegan, Director of Taxation at Chartered Accountants Ireland brian.keegan@charteredaccountants.ie or Kimberley Rowan, Tax Manager at Chartered Accountants Ireland kimberley.rowan@charteredaccountants.ie.

Yours sincerely

Paul Dillon

Chairman, CCAB-I Tax Committee

Source: Chartered Accountants Ireland. www.charteredaccountants.ie