Is any evidence required when declaring a capital loss to Revenue

[dub_nerd]

I'm pretty good on declarations to Revenue, in fact squeaky clean. I had a large capital loss two years ago which I declared, and have been carrying forward. I'll have another one this year. I can see why Revenue wouldn't be sticklers for evidence when I'm handing over money for capital gains, but what about a loss? We're talking high six figures. They didn't ask me for any evidence at the time, but what about if I start writing off gains against it? What might they ask for in future? I'd prefer to be forearmed and not trying to chase share account statements years down the road when the accounts might no longer exist.

 

[Gordon Gekko]

They’d want…evidence of the loss!

So evidence of the disposal, the original cost, and any allowable expenses.

 

[dub_nerd]

What would serve as evidence? Broker accounts are all online only. Would statements in PDF form be adequate?

 

[Corola]

A PDF is a perfectly valid document.

 

[dub_nerd]

I always wonder at that. Back in the day it would have been hard to fake a company's letterhead on paper. Today I could hack together a PDF in minutes. However, if that's what passes for evidence I'm more than happy.

 

[Corola]

If you could hack together a PDF in minutes you could just as easily print it out with an official looking letterhead too.

Lots of companies don't even send letters anymore.

 

[Gordon Gekko]

I always wonder at that. Back in the day it would have been hard to fake a company's letterhead on paper. Today I could hack together a PDF in minutes. However, if that's what passes for evidence I'm more than happy.

And if it was picked-up by Revenue, that’s clear ‘Deliberate Default’, so the tax doubles via a 100% penalty. Plus interest at 8% a year which, when combined with the penalty, triples the tax after 9 years. And to top it all off, in circumstances where someone fakes a document for Revenue, they’d almost certainly look at the tax evasion legislation, which can give rise to a fine of €63-126k and a jail sentence of 1-5 years. And for good measure, employers just love their employees involved in that sort of thing, so the perpetrator would most likely lose his or her job.

All for ‘hacking together a PDF in minutes’.

 

[T McGibney]

Bear in mind that the forging of a false document and the making of a deliberately false tax return are both serious and potentially imprisonable offences.

Any combination of the two would be unlikely to end well and might well destroy the individual perpetrating it.

And Revenue aren't going to validate your high six figures loss by merely looking at a PDF and saying "looks legit". This isn't like returning a book late to the library.

 

[PensionPlans]

Revenue asked me for evidence of investment losses with an online brokerage account around 10/15 years ago.

I mainly provided spreadsheets, they were more interested in the workings than the format.
I used the same sources that I'd calculated the losses with, a decent online brokerage should have realised gains & losses reports on FIFO basis.

The most unexpected part for me was having to explain concepts like stock splits to them.
They may have more specialised teams now than back then.

 

[torblednam]

I'm pretty good on declarations to Revenue, in fact squeaky clean. I had a large capital loss two years ago which I declared, and have been carrying forward. I'll have another one this year. I can see why Revenue wouldn't be sticklers for evidence when I'm handing over money for capital gains, but what about a loss? We're talking high six figures. They didn't ask me for any evidence at the time, but what about if I start writing off gains against it? What might they ask for in future? I'd prefer to be forearmed and not trying to chase share account statements years down the road when the accounts might no longer exist.

Revenue consider that you are only a chargeable person for CGT in a year that you make a disposal(s) giving rise to a gain. Therefore, unless you also had disposals giving rise to a gain (which would have required the deduction of some of your losses), you didn't need to put the losses on your return at all yet.

The position is set out in Tax & Duty Manual 19-02-05:

"A deduction in respect of an allowable loss can only arise in a chargeable
period when there is a chargeable gain against which that loss can be offset. A
deduction of an allowable loss must be made in a tax return for the chargeable
period in which there is a chargeable gain.

Where an allowable loss arises in a chargeable period and there is no
chargeable gain against which it may be offset in that chargeable period, there
is no requirement for a person to include the loss in a tax return for the
chargeable period in which the loss arises. It is not possible to make a
deduction for an allowable loss in the absence of a chargeable gain.

It follows that the time when a Revenue officer has the right to make enquiries
in respect of the entitlement of a chargeable person to a deduction in respect of an allowable loss commences at the end of the chargeable period in which such chargeable person has made a return to Revenue in respect of a
chargeable gain arising in the chargeable period, rather than at the end of the
year following the chargeable period in which the loss was incurred where, for
example, a loss was included in a return but there was no gain against which
the loss could have been offset (see section 959Z TCA 1997)."

The bit at the end is quite important in the context of losses - just because you put it on a return (unnecessarily) several years ago, doesn't mean that the 4 years starts ticking for Revenue to enquire into the loss; their view is that they can enquire into the validity of a loss for 4 years after the year that the return was filed claiming a deduction for the loss against chargeable gains. So that means a person may need to keep records of their unused losses indefinitely, if they want to be able to use them in the future.