Revenue has recently updated its procedures and with obtaining clearance when dealing with Non-resident beneficiaries.

Essentially where a solicitor is acting in an estate where there are non-resident beneficiaries, then, the solicitor together with any Irish-based personal representative will, together with the foreign beneficiaries, be liable for the CAT of the foreign beneficiaries. If the personal representatives are based outside of Ireland, then the Irish-based solicitor of the estate is the sole person who has secondary liability for the inheritance tax of the foreign beneficiaries. This arises under section 45AA of the Capital Acquisitions Tax Consolidation Act 2003.

The section doesn’t mean that you have to appoint an Irish solicitor as an executor where there are foreign beneficiaries, but rather, the solicitor has a secondary liability in those cases. One can still proceed to appoint non-resident executors if the circumstances permit. However, where the executor/administrator is non-resident together with the beneficiary, then, in that case, an Irish solicitor agent must be appointed. Not necessarily as executor/administrator but rather as a local agent.

Example 1

So for example. Mary Smith dies in Ireland intestate and owns Irish property and bank accounts, and is survived by her brothers and sisters (Sean, Tom, Patrick and Susan) all living in the UK . Tom uses Michael Jones of ABC Solicitors to extract Letters of Administration in Ireland. Michael Jones, therefore, is liable to CAT along with Sean, Tom, Patrick and Susan.

Example 2

Take the above example, but in this case, Patrick lives in Ireland and uses Michael Jones solicitor to extract Letters of Administration in Mary Smith’s estate. In this case, both Patrick and Michael Jones Solicitor are liable for the CAT of all the non-resident beneficiaries (i.e. Sean, Tom and Susan).

The Irish solicitor is only liable to the extent that he or she has control over Irish assets.

Obviously, this creates a significant burden on solicitors in administering non-resident beneficiary estates. To alleviate the severity of the responsibility and potential liability on solicitors, Revenue and the Law Society have an agreed procedure so that the Irish solicitor is not personally liable. This is the 30-day letter procedure.

The 30-day procedure is one which is conducted after the solicitor is satisfied that the estate is completed and IT38s will have been filed and taxes paid. At that point, the Irish-based solicitor will write to Revenue and indicate that they intend to distribute to the non-resident beneficiaries. If Irish Revenue does not respond within 30 days of notification, then, the “pay and file” obligations of the Irish solicitor have been met and the Irish-based solicitor is now free to distribute the estate to the non-resident beneficiaries. Obviously, if Revenue does respond within 30 days, and requires further information, the solicitor should retain funds and not distribute until all of the enquiries of the Irish Revenue have been satisfied.

What is new in the procedure, is that Revenue have now introduced a streamlined system for applying for the 30 day clearance. What once was a paper-based letter sent to the central CAT office in Dublin, is now, a clearance request through My Enquiries in ROS. By choosing the CAT section of My Enquiries and further the option related to “CAT – non-res Clearance (45AA/48(10)”, one can then conduct your 30-day request. The solicitor requesting the clearance will be given an automatic message acknowledging the response. It should be noted that the clearance period is 30 calendar days and not 30 working days.

For more information on the new My Enquiries procedures see the updated Revenue manual set out in the link here.

https://www.revenue.ie/en/tax-professionals/tdm/capital-acquisitions-tax/cat-part02.pdf

If you have any probate, will drafting or tax queries, please do not hesitate to email me at ckelly@hcalaw.ie