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Employment Investment Incentive Scheme

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Employment Investment Incentive Scheme

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Minister for Finance (Deputy Paschal Donohoe)

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Minister for Finance (Deputy Paschal Donohoe)

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Snippet Contents:

In my responses to Parliamentary Questions No. 69 of 22 November 2018 and No. 77 of 23 January 2019, I set out how tax underpaid by investors as a consequence of an incorrectly issued Statement of Qualification for relief under the Employment and Investment incentive may be recovered from an investee company in certain circumstances.
I also advised that, in such circumstances, the company may be liable to penalties as provided for in Section 1077E of the Taxes Consolidation Act 1997. The penalty regime provided for in this section applies to all tax defaults. In summary, the regime applies a penalty commencing at 100% of the additional tax due, but reduced by a number of factors including:
- The behaviour of the taxpayer that gave rise to the default, i.e. whether it was Deliberate Behaviour, Careless Behaviour with Significant Consequences or Careless Behaviour without Significant Consequences;
- Whether a Qualifying Disclosure, prompted or unprompted, was made;
- Whether the taxpayer co-operated with Revenue.
Full details on penalties are set out in Chapter 5 of the Code of Practice for Revenue Audit and other Compliance Interventions. This can be found on the Revenue website at the following link:https://www.revenue.ie/en/self-assessment-and-self-employment/code-of-practice-and-compliance/index.aspx.
It should be noted that where a penalty cannot be agreed with the taxpayer, Revenue advises me that it will ask the relevant Court to determine the penalty.
Revenue also advises me that without the full facts of any case, it is not possible to give a definitive answer as to the level of penalty due. I am advised, however, that it is very much in the taxpayer’s interest to advise Revenue of a default, whether intentional or unintentional, in advance of the start of any form of intervention, as the taxpayer can benefit from reduced penalties and avoid being investigated with a view to a prosecution. Full details of options for taxpayers to regularise their tax affairs are set out in Chapter 3 of the Code of Practice. The relevant options for the EII scheme include:
1. Declaring an Innocent Error
An innocent error may be corrected without penalty where the tax default was not deliberate and the taxpayer took reasonable care to comply with his or her tax obligations. A number of factors will be considered when deciding if a tax default will be accepted as an innocent error, and they are set out in paragraph 3.3 of the Code.
2. Self-Correction
To encourage taxpayers to self-review and regularise any errors or oversights, the Code allows taxpayers to self-correct without penalty for a defined period. For the EII scheme, this period ends with the filing of the Corporation Tax return for the period in which the Statement of Qualification was issued or until the taxpayer is notified of a compliance intervention, whichever occurs earlier.
3. Qualifying Unprompted Disclosure
Taxpayers can make an unprompted qualifying disclosure before Revenue initiates an investigation or inquiry or before the issue of a letter notifying the taxpayer of the commencement of an audit. The benefits of making a qualifying unprompted disclosure include significantly reduced tax-geared penalties, and that the taxpayer will not be investigated with a view to prosecution, nor will he or she be published for the defaults disclosed.
4. Qualifying Prompted Disclosure
Taxpayers also have the benefit of making a prompted qualifying disclosure in the period between the date of issue of the audit notification letter and the actual start of the audit. The benefits of making a qualifying prompted disclosure include reduced tax-geared penalties and that the taxpayer will not be investigated with a view to prosecution, nor will he or she be published for the defaults disclosed.