[18.2.8] Criminal Offences and Civil Penalties

Transcription

1 [18.2.8] Criminal Offences and Civil Penalties 1. Penalties with effect from 1 January 2012 A principal is obliged under section 530F to deduct tax from payments to subcontractors in accordance with the deduction authorisation which has issued. Section 17 of Finance Act 2014 introduced a revised sanction where principals fail to operate Relevant Contracts Tax (RCT) on relevant payments to subcontractors. The penalty that a principal will be liable for will be proportionate to the amount of the tax that should have been deducted. The principal will be liable for a penalty for each instance of non-operation of RCT, after 1 January 2015 and this will be based on the status of the subcontractor. Where the subcontractor is registered with Revenue and is fully tax compliant and thus liable to a RCT deduction rate of zero, the principal will be liable to a civil penalty of 3% of the relevant payment. Where the subcontractor is registered with Revenue and is substantially tax compliant and thus liable to a RCT deduction rate of 20% - the principal will be liable to a civil penalty of 10% of the relevant payment. Where the subcontractor is registered with Revenue and is not compliant and thus liable to a RCT deduction rate of 35% - the principal will be liable to a civil penalty of 20% of the relevant payment. Where the subcontractor to whom the payment was made is not known to Revenue the principal will be liable to a civil penalty of 35% of the relevant payment. In all the above instances the principal will be required to submit an unreported payment notification to Revenue. Prior to 2015 where a principal failed to deduct RCT in accordance with the deduction authorisation, the principal was: (a) (b) Liable to pay tax to the Revenue Commissioners at the rate of 35% on the amount of the relevant payment, and Without prejudice to any other penalty or to Section 1078, be liable to a penalty of 5,000 or the amount of the tax payable under (a) above, which ever is the lesser. The penalty tax at (b) is not available for offset or refund and will be calculated without reference to the actual tax, which should have been deducted from the payment. Where the aforementioned penalty applied and the principal submitted details of the relevant payment in a return for the relevant period, and if necessary provided Revenue with details of the relevant contract, Revenue established the amount of tax that would have been due using the appropriate rate for the subcontractor concerned and notwithstanding (a) above, the tax due from the principal was the amount Last updated April

2 established by Revenue. In strictness, for payments made prior to the passing of Finance (No.2) Act 2013, the position was that Revenue would only establish the appropriate rate for the subcontractor where the return for a relevant period was made by the due date, however in practice Revenue established the appropriate rate, regardless of the date of filing of the return. Revenue notified the principal of any adjustments to his liability as a result of this process. As this was a penalty imposed on the principal, it was not available as a credit against the liability of the subcontractor. Section 530M(2)(b) provides for a surcharge of 100 to be imposed where a principal makes a required return after the due date and amends a previously submitted return. In such cases Revenue will serve notice on the principal of the total amount of tax due and surcharge due and payable for the return period or periods. The names of persons who fail to comply with their RCT obligations or who fraudulently or negligently supply incorrect information etc. in that regard, may be published in accordance with section 1086 TCA 1997 subject to the same conditions as apply to persons who fail to comply with other tax obligations. Obligations are contained in subsections (3) and (4) of Section 886 to keep and retain records and linking documents in relation to RCT. Civil penalties under sections 1052 and 1054 Taxes Consolidation Act, 1997 apply in relation to Part 18 Chapter 2 TCA (RCT legislation) and the RCT Regulations made under that section. The table below outlines where civil penalties may be considered under sections 1052 and 1054 for breaches of the obligations required in the RCT legislation. Section 530B(1)(a) Section 530(1A)(b) Section 530B(4)(e) Section 530B(4)(f) Section 530C(3) Section 530C(3) Section 530C(3)(e) Section 530D(5)(d) Section 530F(4) Failure by a principal to submit details of a relevant contract to the Revenue Commissioners. Failure by a principal to obtain and retain documentary evidence as to the identity of a subcontractor. Failure by a principal to notify Revenue of change to the details of a contract. Failure by a principal to notify a subcontractor where the Revenue Commissioners were unable to verify the identity of a subcontractor by reference to the details submitted on a contract notification. Failure by a principal when submitting a payment notification to identify correctly the contract to which the payment relates. Failure by a principal, where a payment is being made to a subcontractor in respect of more than one contract, to submit a separate payment notifications each identifying the part of the payment that refers to each contract. Failure by a principal to notify a subcontractor where a payment notification has been cancelled. Failure by a principal to ensure that a deduction summary accurately reflects the details of all relevant payments made, and tax deducted by a principal in a return period. Failure by a principal to provide to a subcontractor either a copy Last updated April

3 Section 530F(7)(b) Section 530F(9) Section 530J(2) Section 530J(3) Section 530J(3) Section 530J(3) Section 530K(5)(c) Section 530K(5)(d) Section 530L(1) Section 530R(2) Section 530S Section 530(S)(4)(a) Section 530(S)(4)(b) Section 530(S)(6) of a deduction authorisation or to provide to a subcontractor in written or electronic means the relevant details contained in a deduction authorisation. Failure by a principal to notify Revenue of a payment to a subcontractor immediately after the rectification of a technology systems failure. Failure by a principal to provide on request to Revenue information in relation to the circumstances and details of a persistent technology systems failure. Failure of a principal to register with Revenue as a principal contractor. Failure by a principal to submit the necessary details for the purposes of registering as a principal. Failure by a principal to notify Revenue that they have ceased as a principal. Failure by a principal to re-register as a principal where their registration was previously cancelled and they subsequently commenced as a principal again. Failure by a principal to ensure that all relevant payments and the associated tax liability, are accurately reflected on the return due for each relevant period. Failure by a principal to notify a subcontractor of any amendments or cancellations of line items on a return that are relevant to the subcontractor. Failure by a principal to remit tax deducted to the Collector General Failure by the precedent partner in a partnership or by a person authorised by a gang or group, in the case of relevant payments from which tax was deducted, to provide to Revenue Commissioners: The name, address and tax reference number of every person in the gang or group Details of the proportion of tax deducted to which each person was entitled. Failure by a principal, in advance of submitting a payment notification, to obtain from a subcontractor a statement setting out details and the cost of the work giving rise to the payment. The statement shall include the subcontractors name, business address and tax reference number. In the case of a partnership/gang/group the statement shall also include the names of the individual members of the gang/group/partnership. Failure by a subcontractor to keep and maintain a record of all relevant payments received, including the date and amount of each payment, the amount of tax deducted if any and the name of the person from whom the payment was received. Failure by a subcontractor to keep and maintain a record of all relevant deduction authorisations. Failure by a principal to keep and maintain records in relation to: The information and declaration required in contract Last updated April

4 notifications. Relevant payments and the tax deducted from each such payment. The registration details required to register as a principal. The details required to be included on a return for each relevant period. The tax due and payable to Revenue. The following sections deal with criminal offences and penalties for all years up to and including Criminal Offences The legislation provides, on summary conviction, for a fine of 5,000 or, at the discretion of the court, imprisonment for a term not exceeding six months or of both the fine and imprisonment where (a) any person - (i) (ii) for the purpose of obtaining a C2 or RCT47 makes any false statement or furnishes any document which is false in any material particular, disposes of a C2 otherwise than by returning it to the Revenue Commissioners, (iii) fails to return a C2 when required to do so, in accordance with Section 531(13)(c), (iv) is in possession of a C2 which was not issued to him or (v) produces a C2 to a principal after he has been notified that it has been cancelled. (b) any person aids, abets, counsels or procures - (i) (ii) the obtaining of a C2 or RCT47 by means of a false statement, the use by any person, other than the person to whom issued, of a C2, or (iii) the production of a forged C2 to a principal. (c) a fine of 5,000 on summary conviction is provided where any person (i) (ii) (iii) (iv) fails to enter the required particulars on an RCT47 or on an RCTDC, fails to return either document to the Revenue Commissioners, returns any such document which is incorrect in a material particular, fails to comply with any provision of regulations made under this section requiring such person a. to make any declaration (Form RCT1), b. to provide any information or particulars to principals, c. to keep or produce any records, documents or declarations, Last updated April

5 (v) d. to deliver declarations to the Revenue Commissioners, being a principal contractor fails, when making a payment to an (uncertified) subcontractor, to give the subcontractor an RCTDC, or (vi) being a company to which a C2 has been issued fails to notify Revenue of a change in control (within the meaning of S432) of the company. Summary proceeding in respect of such offences may be instituted within 10 years of the commission of the offence. 3. Civil Penalties In addition to the criminal offences above, civil penalties under Sections 1052, 1053* and 1054 Taxes Consolidation Act, 1997 apply in relation to Section 531 and the RCT Regulations made under that Section. The effect is that the names of persons who fail to comply with their RCT obligations or who fraudulently or negligently supply incorrect information etc. in that regard, may be published in accordance with Section 1086 TCA 1997 subject to the same conditions as apply to persons who fail to comply with other tax obligations. Auditors who make a settlement with a taxpayer in relation to RCT should satisfy themselves that a civil penalty is due in respect of the action or non-action in question, before recommending the case for publication. The following table outlines the events giving rise to a civil penalty that are most likely to be encountered. Legislative Provision Event Section of TCA 1997 under which Civil Penalty arises Section 531(1) Failure to deduct and remit RCT. Section Failure to apply for a RCT47 531(12)(a) Incorrect application for RCT47 (e.g. C2 not 1053(1)(a), (b) and (2) produced); Application for RCT47 made fraudulently or negligently. Section Failure to deduct tax or return RCT47 s where C2 1053(1A) 531(13)(b) withdrawn. Section C2 application (form RCT5) fraudulently or 1053(1)(b) and (2) 531(14)(a) negligently completed. Regulation 3 Failure to complete RCT 1. Failure to deliver RCT1 to Revenue,1053 (1A) and 1054 Regulation 5 Failure of principal to remit (with the appropriate declaration) RCT deducted. Regulation 6 Failure of principal to issue form RCTDC. Regulation 18 Failure of principal to ensure person who produced C2 is the person whose photograph appears on it. Failure of principal and subcontractor to sign RCT46 in each other s presence. Regulation 20 and 21 Failure by principal to write up RCT47. Failure by principal to make annual return (RCT35). Failure to retain RCT records for 6 years. Last updated April

6 Legislative Provision Event Section of TCA 1997 under which Civil Penalty arises Fraudulently or negligently making incorrect annual 1053(1)(a) and (2) return (CRT35). Regulation 23 Failure to produce records to an authorised Revenue official. General Fraudulently or negligently furnishing any incorrect, documents, statements, etc. in relation to RCT. 1053(2) * Please note Section 1053 does not apply to acts or omissions after 24 th December 2008 in accordance with Finance (No. 2) Act Last updated April