4 year rule for refunds - some crazy decisions

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Graham_07

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A bit off thread but a colleague told me of a case recently. Taxpayer was owed a refund of tax for 2005 , they also owed Revenue a balance for 2004 and were further owed a refund of tax for 2009. The refund for 2005 was disallowed under the 4 year rule. The liability for 2004 ( also outside the 4 years but irrelevant ) was collected by reducing the 2009 refund and the taxpayer got the balance. Try explaining the logic of that to the taxpayer he said to me.
 
Hi Graham

i have moved this from another thread as it is off topic, but also deserves a thread on its own.

I was speaking to someone who is also dealing with MABS. The Revenue is chasing her for a recent underpayment while rejecting her claim for the old refund.

Is it time to change the law on this and extend the time?

It seems bizarre although, for administrative reasons, I would accept it for small amounts.

Brendan
 
The relevant legislation is Section 865 of the Taxes Consolidation Act 1997. Link to a [broken link removed]article on same.


The actual legislation is at Part 37 on [broken link removed]

Revenue have reduced the time for refunds yet can pursue taxes, almost indefinitely. I am sure there is a lot of unclaimed tax and assessed refunds not being paid as a result of this rule.

I have, in fact only today received a Notice of Assessment on a case for 2004 where Revenue charged the 10% late filing surcharge to the liability. Then deducted the total liability from the tax paid ( which was greater) , leaving a net refund to the taxpayer of over €1,000 and then refused to pay it with the words

"this repayment may not be due in accordance with S.865 TCA 1997."
 
A lot of these decisions have no common sense at all. I have noticed they always chase payments but could leave refunds reseting and if nothing said, a client might never get some refunds back

Simple example a person owed 1k for 2007 and exactly 1k refund on system for 2006- They send out demanding letters/ sheriff threat looking for 1k money when all they had to do was basic contra, defies logic how the balances are not offset/cleared before any demand issues.

In regard to your case, if refund on ros shows up, I would continue to push for it. We should ask the question why they have not issued refunds resting on system

Also lately i have also noticed that if you put a loss back claim on ct1, the majority of time they are now ignoring it till you phone up.

I wish they do more to issue genuine refunds than delaying/ignoring them

Actually what happened in your example ignores the whole taxpayer treatment charter . I have to say an example like that would really annoy me.

But- I know of a vat case this week where a refund for 2004 on system is going to be credited against current year so sometimes/ a lot of time it is down to who is dealing with case on phone etc.

I think to conclude revenue should now look at the ros registration balance for all clients and any refunds on system should be investigated and if genuine offset/refund money( say from 2002 to 2006 for eaxample) as if you want to voluntary strike off a company you would still have to pay a 2002 tax bill say for corp tax for €200 even if that was 8 years ago and you cant remember why balance not paid/even due
 
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From a logical point of view, this one has never made much sense.

I can understand why it was introduced from a logistical stand point, but while it does cut down on the administration requirements of the department, when you hear of the individual cases such as these, you are left wondering if the ends justify the means and scratching your head slightly.

Brendan Burgess said:
Is it time to change the law on this and extend the time?
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It begs the question will this actually resolve the issue. If the time on refunds were extended to 10 years (just a random figure plucked out of the air, not a suggestion by any means), would we end up in a situation where we find the same anomalies occurring? (money owed on an underpayment from 7 years ago [or 12 years ago] but refund refused for an overpayment 11 years ago)

Having said that, extending the time would significantly reduce the number of occurrences of this so potentially still worth considering. I just wonder what the logistical/administration cost of extending it might be.
 

That above to me does not make any sense. It is a simple adjustment to do contra on revenue system and them pursue any shortfall.

The person revenue are chasing above should agree to pay the difference, and let revenue take to court for balance if they want(love to see what a judge would make of it) They have money on hand but will not credit it, defies logic.

I have seem a case where a company owes a substantial amount in one tax([paye/prsi) while they issue a refund for another tax(vat) without doing an offset(might as well be given money away sometimes)


Finally the person involved should not be to worried. If taxman attitude is like that personally be less inclined to do any short term deal but do over longer period.
 
Just going to play devil's advocate here. The system is self-assessment, so where a taxpayer is due a refund arguably some kind of time limit must be put in place for claiming said refund?

By the same token, given that the system is self-assessed it would be unfair to insist that revenue be constrained as to the periods up to which they can pursue liabilities, the declaration of which was the responsibility of the taxpayer, as that would encourage evasion.

It's also possible that the revenue computer system won't allow the user to do the kind of contra that has been mentioned several times. There are likely to be "stops" in place which it may be nearly impossible to get around.

Personally I agree that the examples above appear very unfair, but as I said, just playing devils advocate..!
 

Easy enough to change the computer system I'd say. I can understand a time limit for small amounts but if you have underpaid one year and overpaid another year the revenue should be allowed to use some common sense.

I made 3 claims one year. I had underpaid tax by €300 in year one and overpaid in year 2 and 3 by a total of €1500. They could have offset the underpayment against the overpayment but for some reason didn't, so I was up. Crazy I thought.
 
becky said:
I had underpaid tax by €300 in year one and overpaid in year 2 and 3 by a total of €1500. They could have offset the underpayment against the overpayment but for some reason didn't, so I was up. Crazy I thought.
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Surely the underpayment still stands in your account and you owe the money?

The fact that the IT systems were unable to calculate the net position, does not allow you off the liability.
 
Revenue will sometimes forget about it.

I am surprised that no one has challenged them in the courts over their refused refunds.
 
Brendan Burgess said:
Surely the underpayment still stands in your account and you owe the money?

The fact that the IT systems were unable to calculate the net position, does not allow you off the liability.
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It was the tax year 2004 so I expect (hope) it's written off now. That said I always meant to check it as I was expecting a refund for that year. It went out of my head after a while.

I realised the IT systems wouldn't do the net but I would have thought the person in the revenue would have seen the underpayment against my record and offset it manually.
 

These types of situations happen a lot and I have encountered letters coming out from Debt Management in Revenue looking for underpayments. These letters have printouts attached showing the underpayment. The letter is signed with a name ( not just a computer generated thing ) . Then when I check ROS I see that maybe a payment by the client has gone into a wrong year and year one is overpaid by the exact amount due on year 2. Now fair enough for computer generated correspondence and yes, as other have said, stops may be in place to prevent automatic set-off, but these letters have had to be done with actual human input. Surely if I can look at ROS and see the mistake why do the staffers sending out these letter not do the same? I end up having to ring, point it out to them, then fax or email a request for set-off, ( as this cannot be done just on a whim by the staffer ). The time wasted on this sort of thing is very annoying.

I agree with the other poster, about paying the difference and let them pursue any balance. If it is showing on the system it should be taken into account.
 
mandelbrot said:
Just going to play devil's advocate here. The system is self-assessment...
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The four year rule applies to all taxes, not just self-assessed taxes. It arguably affects PAYE taxpayers far more than self-assessed taxpayers, as the latter are obliged to file annual tax returns and by doing so they can claim all their entitlements to allowances, credits etc as a matter of course.
 
Does the 4 year rule not apply to making of returns and assessments (S955)? If a return is made within the 4 years and a notice of assessment has been made showing a refund the time limit does not seem to apply. I could be wrong but that would be my understanding of the legislation.
 
Apologies I note this thread is about section 865 not section 955 but point is same. Legislation seems to refer to time limits on making claims not on refunding tax
 
OK I'm back for another touch of Satanic Advocacy..!

Yes, the time limit refers to making a claim; I'm not actually clear as to what exactly constitutes making a claim though?

Is the return itself (taking the example of income tax since this is the one most frequently cited in the earlier posts), deemed to be a claim for repayment, or does the taxpayer need to subsequently request repayment / offset?

In any case where Revenue have received a claim for repayment they absolutely should have made the repayments, but if a claim to repayment isn't made then surely the taxpayer (or their agent!) has to take some of the blame? There's a lot of talk about contras in some of the posts here, but surely money is sitting on a taxpayer's account as an overpayment is not Revenue's money, and they therefore have no authority to do anything with it without instruction from the taxpayer. If they did start moving people's money around you can be sure there would be uproar (same as if the bank moved money belonging to you from one account to another.)

Again, it's a self assessed system; with widespread access to ROS, and paper assessments / statements issuing from Revenue to taxpayers (and their agents!), then it's a bit rich to turn around 4 years on and blame Revenue, when the existence of the overpayment is there for the taxpayer (or their agent!) to see, and claim, at any point during those 4 years.

In Graham's original example he says he received a 2004 Notice of Assessment, which resulted in an overpayment that Revenue aren't going to issue. I find it hard to sympathise with a taxpayer who is sending in their return nearly 5 years after it's due date. To be fair you could have sent it in, what, 3 years late and still validly claimed the repayment! If someone is that remiss in keeping up their end of the deal then I suppose that is a consequence they have to face.
 
A valid claim is defined in section 865 as being
a statement or return which is required to be delivered by the person in accordance with any provision of the Acts for a chargeable period
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Based on this, submitting a Form 11 is a valid claim. There is no requirement that I can see for the taxpayer to submit any further claims.

The Revenue may make enquiries into the claim and request further information from the taxpayer to confirm the claim is accurate.
 

Just to clarify, this was a one off return for 2004 for a person who, until he received a notice from Revenue to say he was due a refund for a later year but that it would not be repaid until the outstanding return was filed for 04, did not even know that a return was due for 04 ( or that he was deemed treated as a self-employed individual for that 04 period). It was not a case of a continuing self-employed individual who certainly ought to have known their obligations in this regard. The tax on account was R.C.T. paid in by a principal contractor. Revenue now get to keep that money.
 
Obviously you'd have to sympathise with the taxpayer in your case Graham, but I still don't think the law is inherently unfair. Ultimately the obligation for submitting a return/making the claim for repayment has to rest with the taxpayer. There are probably any number of individuals who have RCT credited against their accounts but haven't submitted a form 11 for years, or in some cases may not even have registered their trade...

There has to be legislation to ensure that people are incentivised to deal with their tax affairs reasonably promptly; you can blame revenue or the government if you want, but personally I like to blame the people who spend their lives trying to avoid paying their fair share, and whose behaviour makes the legislation a necessity...

Slightly off to one side on this one Graham, but did the guy not have pink slips from the principal? If not then the principal is surely guilty of an offence...
 
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