Capital Acquisitions Tax Audit

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kkilkenny

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Got letter in door today from revenue saying ive been selected for an audit in relation to the 2008 return of CAT.

Asking for

1. written explanation for the difference in valuations between Inland Revenue Affidavit and IT38 of the property

2. Please state the source of funds giving rise to bank deposit interest earned by you in 2008 and subsequent years.

Havent a clue what any of this means. Rang the solicitor who said she got the 1st question in letter too and she will write a letter explaining the obvious that the reason for the difference is because house prices dropped so much. Is she correct in saying this is what they are asking for?


She never got the 2nd request on her letter but I read it out to her and she said they are looking for an interest certificate for the deposit account that I put the proceeds I received. Im not sure if this is correct. Are they asking for this or is it how much I earned or what sorry Im bad with financial jargon.

Any help would be much appreciated.
 
While I'm sure what you have written makes sense to you, I found some of the detail a bit confusing, however:

Re: Q1.: (CAT is not my area but my understanding is...) The inland revenue affidavit was submitted in order to get grant of probate, and had the original cowboy valuation on it. The IT38 is filed when the disposition has taken place, so was based on the lower, more accurate, valuation. Revenue want to know why the discrepancy. The solicitor should be able to manage this one.

Re: Q2.: Financial institutions are required to give Revenue certain details in relation to deposit accounts and interest earned. They want to know what was the source of any monies you had on deposit in / since 2008, to ensure that they weren't from an untaxed source. Coupled with Q1 it would appear they believe there may have been some kind of messing around with money in the family, or that you received some cash, without gift/inheritance tax being declared. Assuming everything is legitimate and above board you should have no problem clarifying things to their satisfaction. In this regard, an interest cert is NOT what they are looking for, or certainly not all that they are looking for; they want to know where the money that earned the interest came from... i.e. was it saved up over time out of regular PAYE etc.. earnings (bank statements would prove this).
 
Hello

I think you may be mixing things up here.

The value of the house for purposes of the affadavit and also for the IT38 should be the same value. This is the value of the property when it was inherited by you, at date of death.

The fact that the house was later sold for a lesser amount is irrelevant.

The value of the house on both the Revenue affadavit and the IT38 should be the same
 
Im a bit confused now. The solicitor said the it38 would have had the price it sold at on it.

So the value on both of these forms should be the original valuation.

As far as I know the solicitor arranged for the tax on the original valuation to be paid, it was the interest that had been added while the house was waiting to be sold that she wanted to appeal. I rang her to find out the details of how much was stated on each form, but she said it was so long ago she would have to look up the file.

Would revenue be able to tell me more details about the difference in valuations ie what value was put down for each of them.
 
From your first post, its clear that the values placed on the IT38 and the probate application affadavit do NOT match. This is the reason for the Revenue audit

The IT38 (which is the Self assessment Capital Aquisitions Tax form) and the probate Affadvit valuation should be the same. This is the value of the property on the day that you inherited it.

After you have sold the property, the difference between the inheritance valuation and the proceeds of sale, is a capital gain or capital loss which should be reported on the relevant capital Gains tax return. In your case it appears that you have encurred a capital loss on disposal of the property.
 
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