Interest and Penalties on Dividend Payments going back 25 years

[Sean Lawlor]

I'm handling my late fathers estate. He was a PAYE worker so never made tax returns.

It looks like the top up tax (from standard rate to marginal) was never paid on share dividends he received for about 25 years!

I'm afraid the back tax could wipe out his entire estate.

Before he died, he distributed cash to his grandchildren. Can the Revenue claw this back if his estate doesn't cover the tax bill?

 

[Protocol]

"He was a PAYE worker so never made tax returns."

As you now know, being a PAYE worker has no relevance to whether or not a person makes a tax return.

Thousands of PAYE workers make tax returns every year.


To answer your specific question, I suggest the executor of the estate seeks legal advice.

The shareholding must be huge if 20% of the annual dividends might "wipe out the entire estate".

 

[ClubMan]

The shareholding must be huge if 20% of the annual dividends might "wipe out the entire estate".

Or the estate might be modest/small?

 

[Sean Lawlor]

The shareholding must be huge if 20% of the annual dividends might "wipe out the entire estate".

Where did your 20% come from? Do you know what rate of interest is applied in this case?

 

[T McGibney]

What level of annual dividend income are you talking about over the 25 years?

 

[NoRegretsCoyote]

A friend of mine is in a similar situation looking after his late father's estate. He discovered decades of dividends with no tax return made on them (still a small part of the estate).

He was surprised that Revenue had never noticed.

 

[T McGibney]

A friend of mine is in a similar situation looking after his late father's estate. He discovered decades of dividends with no tax return made on them (still a small part of the estate).

He was surprised that Revenue had never noticed.

Why? Revenue don't really care about immaterial amounts. As Frank Brennan, the late great tax consultant used to muse, in respect of tax on credit union dividends, "They're not going to lock up every Garda in the country because they all got a fiver a year from the Garda Credit Union".

 

[NoRegretsCoyote]

Revenue don't really care about immaterial amounts.

It was a material amount Just small in the context of a huge estate.

 

[Sarenco]

As Frank Brennan, the late great tax consultant used to muse, in respect of tax on credit union dividends, "They're not going to lock up every Garda in the country because they all got a fiver a year from the Garda Credit Union".

Are credit union dividends not subject to DIRT?

 

[T McGibney]

Are credit union dividends not subject to DIRT?

Since 1 January 2014, all credit union share dividend and deposit interest paid to members is subject to DIRT, with the exception of dividend or interest paid to members who are exempt from DIRT (certain people over aged 65 and certain people who are permanently incapacitated). Before 2014 certain types of credit union accounts were not subject to DIRT.

Deposit Interest Retention Tax (DIRT)

If you earn interest on savings, you pay a tax on the interest called Deposit Interest Retention Tax (DIRT). Information about DIRT, who pays it and exemptions and reliefs.

www.citizensinformation.ie

 

[Sean Lawlor]

The amounts themselves are not huge. The problem is the multiplier affect of an exorbitantly high interest rate over a very long period of time, potentially turning a tax underpayment of say €10,000 into an amount owed of €100,000 - and that's just for one year! Then factor in that many of the shares (high yielding Irish Banks that took a few wild bets on property) are now worthless.

 

[NoRegretsCoyote]

Then factor in that many of the shares (high yielding Irish Banks that took a few wild bets on property) are now worthless.

Can you offset a capital loss against an income tax underpayment for an estate?

(I don't know the answer)

 

[T McGibney]

Can you offset a capital loss against an income tax underpayment for an estate?

(I don't know the answer)

No.

 

[T McGibney]

The amounts themselves are not huge. The problem is the multiplier affect of an exorbitantly high interest rate over a very long period of time, potentially turning a tax underpayment of say €10,000 into an amount owed of €100,000 - and that's just for one year! Then factor in that many of the shares (high yielding Irish Banks that took a few wild bets on property) are now worthless.

Condolences on the loss of your father.

Have you receive professional tax advice on this? Until you do, I wouldn't be assuming anything.

 

[Sean Lawlor]

Condolences on the loss of your father.

Have you receive professional tax advice on this? Until you do, I wouldn't be assuming anything.

Thanks. No, I haven't. I was hoping to get some idea of the situation. It's a fairly straightforward case of failing to make a tax return to declare additional non-paye income. It must happen a lot. Plenty of PAYE workers ended up with Eircom share dividends for example.

 

[T McGibney]

Thanks. No, I haven't. I was hoping to get some idea of the situation. It's a fairly straightforward case of failing to make a tax return to declare additional non-paye income. It must happen a lot. Plenty of PAYE workers ended up with Eircom share dividends for example.

I actually suspect you may be overestimating the scale of the problem. Although there are always exceptions that prove every rule, I can't recall Revenue ever pulling out all the stops to interrogate the past tax returns of deceased PAYE taxpayers unless there was either a substantial undeclared disposal on which capital gains tax should have been returned and paid or material tax evasion in the persistent non-reporting of eg trading or rental income.