Income Tax Clearance in Estates – Part 3
16 November 2023
In previous emails, we looked at the steps to follow as part of income tax clearance. We had got to the stage where the solicitor/accountant was in a position to make an application to Revenue for clearance. This was done by pulling together an income profile for your client.
For reasons of space, we could not go into detail about an important element of collection income details and that is from the employer of the deceased. Where the deceased was still in employment at the time of death, then income details can be obtained from the employer. It should be noted that P60s were abolished in 2018. So instead of getting P60s for years 2019 onwards, one should look for the December payslip of the deceased for each year from 2019 to the date of death. The end-of-year payslip will contain that month’s pay, but a note of all pay for the year and tax paid.
Having obtained the full income profile of the deceased one is now ready to make your clearance application. Here are some of the issues that can arise.
Issue 1. Even though it is not part of the manual, the Revenue oftentimes requests the grant of probate. This thus delays clearance until the grant is in, which is kind of against the spirit of the system because the rationale was that you could make your clearance request at the time you submit your probate. So the 35 working day period was due to commence from that time. However, the clock gets reset if Revenue look for the grant of probate.
Issue 2. It appears that the clearance system is decentralized, and so one can have a request from a Revenue officer from any part of the country. It is not necessarily an officer in one’s county. What is surprising, is that sometimes a request can come in from one Revenue officer and then another Revenue officer can get assigned to the file.
Issue 3. As mentioned previously Revenue is very keen to see what the position is with respect to foreign disposals. Foreign disposal of property is subject to Irish CGT where the deceased was resident in Ireland. So many times a deceased may dispose of foreign property, pay the CGT abroad but not think about Irish CGT. So that can give rise to a liability in Ireland. There may be some credit from tax paid in the foreign country if there is a double taxation agreement in place, but each case would have to be assessed on its merits.
Issue 4. While it may appear strange, Revenue often request to see the Statement of Affairs. We are unsure why this is the case given that in theory it should be on the system. However, we have had that experience.
Issue 5. Revenue can have at times the upper hand in information. This can be positive or negative for a client. For example, some farm income on rental is exempt and the deceased may not have claimed the exemption and a credit could be due. Alternatively, what could happen is that there is a historic agreement with Revenue on file and as a result of more up to date information this can conflict either negatively or positively for the deceased.
Issue 6. Does silence issue clearance? This can be a difficult matter. The rule is that one is free to distribute if there is no response from Revenue after 35 working days. We have had experiences where the 35 working day period has passed but then queries arise (prior to distribution) and those queries have to be dealt with. Revenue in those cases do not appear to be apologetic for the late query and will simply require the information and will not permit clearance until the fresh information request is dealt with.
On balance, the Revenue clearance system is good, in that it sets a new baseline and once one is up and running in getting used to dealing with clearance one can work within the system. However, Revenue has the upper hand all the time, and patience and diligence is needed at all stages of the process to get to close out and have that magic clearance letter on file.
Hope this helps and if you have any probate, will drafting, capacity or tax issues please reach out to email@example.com