Surcharge On Late Filing, Income Tax Deadline – 31st October

22nd September 2010

With the rapid decline in the state of the economy in 2008 we found by the time the filing deadline had come round in October 2009 that quite a few clients had difficulty in paying the tax liability on their 2008 profits. In such circumstances we would strongly advise that the return be filed none the less under the PAY & FILE SYSTEM, as regardless of your PAYMENT situation the following penalties apply to late FILING:

1. 5% of the amount of the tax liability for the year subject to a maximum penalty of €12,695 where the return is filed within two months of the due date.

2. Where the return is filed two months after the due date, the penalties increase to 10% of the amount of the tax liability subject to a maximum penalty of €63,458.

As regard settling the liability, Revenue has a number of arrangements available to the taxpayer. For example, where the total tax outstanding is less than €6,000 and a tax clearance certificate is not required, Revenue at their discretion can offer an informal arrangement which usually gives the taxpayer an extra year to pay the liability at their own discretion and on a NIL interest basis. Normal instalment arrangements by direct debit and interest calculated would commence after the twelve months grace. However, this is an important lifeline for many clients.

If you have set up a company you may also be liable to file a personal income tax return even if the company never traded or if you have no income other than PAYE salary. We fear that may entrepreneurs may have companies set-up out there where they hoped to get a new business venture going but ultimately they ended back in PAYE employment, leaving the company to sit there. Unfortunately, the provisions where a shareholder/director of any company fails to file a tax return as required, are the same as above. However, the penalty is more severe in that the ‘liability’ on which the penalty is calculated is tax payable for the year on all income, rather than the tax due at the end of the year (which typically should be nil for a PAYE worker).

So, failing to file a tax return where your actual liability is NIL if you file on time, could be turned into a considerable LIABILITY if you file late.

Any comments or queries welcome.

Related Articles
Income Tax 2010
Income Tax 2009