It appears that the new Statement of Affairs has had an additional side effect which is not really that surprising. From speaking to my accountant colleagues, the Revenue are now more and more seeking income tax returns before they will issue income tax clearance on any estate. I am seeing this myself.

The income tax threshold for a single person is €18,000. That is, the exemption limit. You pay no income tax if your income is less than this amount. Revenue practice of seeking income tax returns, is more and more applying, even in cases where the only income of the deceased was the State contributory pension (€12,912 per year (or €248.30 per week)). You might wonder why or how to deal with this.

In some cases where a person has only the old age State pension I have dealt with the query as follows. I have sent the query regarding the requirement to file a Form 12 (which is the income tax form for PAYE workers) to ROS through My Enquiries and also explained that the deceased was on the State contributory pension and with no other income and could they dispense with the need to file a Form 12. This has invariably not worked for me. Generally Revenue have insisted on Filing a form 12. I wonder has this been your experience?

The good news is, is that, this demonstrates that our Revenue system is working well. Obviously the time saved on having the CA24 electrified (a real word) has meant that Revenue have now more time to be poking around into other areas looking for cash. That is what an efficient Revenue system should be doing. So the Revenue arm of Government is in ruddy health. The bad news for your clients is that, this extra time and extra poking could spell more work for you and additional payments for estates.

Generally in low income cases, Revenue only ask for income tax returns from 1 Jan to date of death. Generally there is no liability. However, the obligation to file a Form 12 is done in the hope that the range of questions in the Form might prompt someone to remember that dividend income was coming in from England or there was some rental income from a farm up or down the country. That then might prompt further investigation and the requirement to look back further years. Hence the requirement to file the Form 12, so the Revenue can get a foot in for greater investigation.

So be prepared for more of this type of scenario arising. What steps should you be doing so in this regard to prepare for this? These are some:-

1. You should be teeing up your clients that this is coming down the tracks.
2. You should be managing client expectations on timelines.
3. In cases where you don’t know the deceased very well you should get a statement of working history. Revenue like to know what clients did over the years. This is particularly relevant in cases where the deceased lived abroad (eg England or the US) and the Revenue have very little about them on the system. They like to know why is that pension coming in from ABC Ltd or XYZ country, etc etc.
4. You might consider lining up a regular accountant that you can have on standby ready to get this work done. Perhaps speak with clients at the start and say that this is likely and have your accountant at the ready so there is no delay. Your accountant can be liaising with the executor in the background pulling together income history and backup documents.

So, while this is bad news for us, in that its more work, more friction in the process and more to manage for clients, the silver lining is that there is more funding coming into the public finances. So plenty more to keep the Debt Clock from ticking

See the link http://www.financedublin.com/debtclock.php