Will Revenue chase me over banknotes like my lawyer never sent them?

July 3, 2022

Will Revenue chase me over banknotes like my lawyer never sent them?

In 2001, I sold a property and I had a CGT tax of IRL 10,000. This was calculated by an accountant and I received a bank bill from the tax authority. My lawyer requested that I forward my calculations along with the bank transfer, which I duly did.

To my shock, I was contacted by my bank at the end of 2004 when it reconciled the outstanding Irish pound in exchange for the launch of the euro in January 2002, to say that the bank was never negotiated.

I contacted my lawyer who told me that he had lost the bill and asked that I fill in an indemnity with the bank and to have a new bill issued to the Swedish Tax Agency. He announced that he had a contact with the tax authority and that there would be no problems with tax penalties.

I had the new euro exchange forwarded to the lawyer.

I did not think about this issue until I recently got rid of some stocks and opened a file that I keep under the heading CGT.

I called the bank this week to find out that the bank account was never redeemed.

The lawyer is no longer in practice. Since it is over 20 years since this CGT would have been paid, I am extremely worried that this will come back and bite me. As a PAYE taxpayer, I am always careful to keep track of my tax affairs.

I also realize that it is unlikely that it will come to Revenue's knowledge, but it is wrong not to leave the draft Revenue. Is this a question for the Swedish Bar Association?

Mr JJ, email

You seem to have had deep bad luck in your choice of lawyer here. Their legal advice may have been very good, but based on the facts you describe, there seems to have been a problem with managing money.

The penalties that have been added over the last 21 years should be interesting if it comes to that. You have a potential headache even though there is really no guarantee that the tax commissioners will continue with it.

There are a couple of problems here. Primarily among them from your point of view is the responsibility for the tax. And in relation to capital gains tax, it's up to you, the taxpayer. It is your responsibility to ensure that it is calculated correctly and returned. And if Revenue were to pursue anyone, it would be you, not the lawyer.

I guess the key question is whether they will do it. And in truth, it is unlikely. As I understand it, there is nothing to stop them from going back as far as they want, even if they would have to have a reason to believe that it was deliberate and / or significant if they were to rake over the coal in a case for more than two decades ago. fraud.

Such trawls cost them a lot of money and the income is nothing if not pragmatic. The sum here, with interest and penalties, can be very significant for you – certainly a multiple of the original debt when penalties and, more specifically, interest, which can be charged on a daily basis, are applied. Twenty years plus of interest is no laugh. But the cost of income from pursuing someone over a 20-year bill would also be significant, especially if the issue got stuck in a bar association investigation.

Again, my view is that, without very strong reasons, a tax audit would not go back more than seven years, which is the time we are expected by the tax authorities to keep receipts and other tax-relevant paperwork.

But if they do, it would not be nice. Nor would it be surprising in these circumstances for Revenue to trigger an audit to make sure there was nothing else they had missed and that you really do not want to get caught up in a Revenue audit. It is a laborious process and few of us are as meticulous in our paperwork as Revenue would like.

In reality, the biggest issue here may be your own conscience. You state that you have always been careful in your own tax matters. In this case, the question here is how much this outstanding tax bill will annoy you and worry you.

If you can live with that at this stage, I suspect Revenue can too – although there really is never any guarantee in that department.

One thing that fascinates me is how you let it get to this stage.

That said, calculating and paying taxes is your responsibility, not your lawyer's or accountant's. It's not uncommon for a lawyer (or accountant) to act as a channel for income – but, absolutely for lawyers, I suspect it's less so nowadays than it could have been 20 years ago.

But you had already seen a draft get lost here. Not only was it not paid over to Revenue in time when it should have been done, but it could not be found at all when it was discovered three years later that it had never been redeemed.

Law firms are organized places. They must be given the sensitivity to the issues they deal with. All drafts sent to the office should either be in your file or a file that the office had for payments being processed, probably with a copy in your file to confirm the action taken.

After seeing one draft fail, I would have been very reluctant to use the same lawyer as the channel for the other, the euro draft. I can see the attraction of their reported claim that they could turn the issue of punishment into a “contact” in Revenue but even that plays a bit fast and loose.

Of course, even if, as in this case, you trusted the lawyer a second time, I would have made a point of checking with the bank to make sure it had been redeemed. That you did not, given your attitude to your tax affairs, is surprising.

Revenue is not in the habit of sticking to unresolved drafts, so it should have gone through the system fairly quickly, especially as, one assumes, the lawyer should have made an effort to make sure nothing went wrong the second time around.

Which brings me to your last point – is this a matter for the Bar Association?

There is no indication that the lawyer was involved in any fraud here; no draft was redeemed. But mismanagement of clients' finances is definitely a hot issue for the Bar Association and one they tend to address when making some substantiated claims.

The crucial question here, however, is that you say that the lawyer is no longer in practice so I'm not sure exactly what they can do about it. The only benefit of you formally reporting the case to the Bar Association that I can see is the hope that it will strengthen your case for mitigation of penalties should the tax authority call. But I'm not sure how impressed they would be that it took you over 20 years to do so.

  • Send your questions to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice

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