# Share Options, RTSO and self-assessment



## Warren (15 Jan 2011)

Hi,

I have been contributing some of my salary into an  Employee Stock Purchase Plan (ESPP) for the past 18 months. The amount  contributed from my salary is used to exercise shares at the end of  every 6 month period. The first allocation was in December 2009 and the  3rd just a few weeks ago. On the two previous occassions I paid income  tax as part of the Relevant Tax on Share Options scheme (returning form  RTSO1). While looking to pay RTSO for the most recent  batch of exercised shares I came across a leaflet that indicates that  since Im receiving these share options I have to do a self assessment  return.

I didnt know this and didnt do one for 2009 and the date  for 2009 assessment has passed. I dont owe any tax but seems I have to  do the self-assessment anyway. I've read another thread where it said  that I would have to pay a late filing surchage of 10% of the total tax  liability for the year (not on the amount of tax liability which is NIL)  - which basically means Id have to pay 10% of my total income tax  payments for the year which would be a fine of a couple of thousand  euro. This seems insane, is this correct?

What should I do. Should I do a self-assessment now for 2009 and hope no fine materializes?

Thanks,
Warren


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## BarMcc (17 Jan 2011)

The best option is to submit your return as quickly as possible.

There is a 10% surcharge where return is filed more than 2 months late.

When you submit the return the surcharge will probably get automatically attached.

You can write to your local Inspector and explain the circumstances and he/she may waive the surcharge.


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## Warren (23 Jan 2011)

Thanks BarMcc. Im in the process of filling in form 11 but I have to say  the "guide" provided by revenue is superbly vague in its detail for a  great number of the sections. For share options purchased as part of an  ESPP and  for which I've paid income tax under RTSO its not clear how many of the  following sections I need to declare the shares under on form 11

Section 219 (b) Share/Securities - the guide says _"Shares / securities  received free of charge or at a discounted price are not taxed at  source, and as such any taxable benefits from these sources should be returned on the  employee’s/director’s Return, [219(b)]."_ - from this Im inferring that I  should declare the market value of the shares I purchased at a discount  in this box but why I add that detail here AND in following sections is  not clear

Section 232 Convertible securities - dont think I need to add anything here

Section 233 Share Options - this does seem self-explanatory I declare  the marked value of the shares I purchased (the chargeable amount) and  the amount of RTSO paid

Section M - Chargeable Assets Acquired in 2009 - guessing I need to  provide the market value of the shares I purchased. Not sure what the  revenue does with this piece of information other than to have a view  that I may have a CTG liability at some point in the future


Any help on the above would be appreciated. Planning a call to revenue but an enlightment in advance would be useful.

Thanks,
Warren


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## selfassessed (11 Feb 2011)

If you file for 2009 now you will be hit with a heavy surcharge.  Have grounds for appeal ready it but don't hold your breath on getting it overturned - the appeals process is usually a waste of time.  It would be cheaper to just not file.  The fine doesn't increase after more than two months late (since you haven't any liability) and the chances of them finding you are pretty much nil anyway.  You aren't avoiding tax, just the unfair surcharge.


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## mandelbrot (11 Feb 2011)

selfassessed said:


> You aren't avoiding tax, just the unfair surcharge.



How late is too late to file a return, in your opinion?
Is it ever fair to levy a surcharge on people for filing their tax return late, in your opinion?
If not, what incentive is there for anyone to ever file a tax return (or pay their tax for that matter), in your opinion?


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## mandelbrot (11 Feb 2011)

selfassessed said:


> If you file for 2009 now you will be hit with a heavy surcharge.



10%? Heavy? What would be a light surcharge?


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## mandelbrot (12 Feb 2011)

selfassessed said:


> Have grounds for appeal ready but don't hold your breath on getting it overturned - the appeals process is usually a waste of time.



The appeals process certainly is a waste of time if you have no grounds for appeal - i.e. if you cannot argue your case based on a point of fact (e.g. the return was not in fact late), or a point of law (dunno how this would apply to the case of a late return): if a return is filed late, the legislation is clear about the applicability of a surcharge. It's black and white.

I'd say your only hope would be to go down the High Court route of proving the legislation is somehow unconstitutional. And good luck with that!

And some light reading on the topic for you
[broken link removed]


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## selfassessed (12 Feb 2011)

mandelbrot said:


> It's black and white.
> 
> I'd say your only hope would be to go down the High Court route of proving the legislation is somehow unconstitutional. And good luck with that!



Have you considered that there is the possibility of middle ground in between black and white and unconstitutional?

Draconian?  Excessively harsh?  Legal but brutal?

10% of all tax already paid is reasonable?  For a married couple with moderate income this is thousands of euro.  Completely out of line with the offence in question.  You would get far less of a fine for many criminal offences.


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## mandelbrot (12 Feb 2011)

selfassessed said:


> Have you considered that there is the possibility of middle ground in between black and white and unconstitutional?
> 
> Draconian?  Excessively harsh?  Legal but brutal?
> 
> 10% of all tax already paid is reasonable?  For a married couple with moderate income this is thousands of euro.  Completely out of line with the offence in question.  You would get far less of a fine for many criminal offences.



Absolutely, of course there's plenty of middle ground, and I agree (as I said elsewhere) that it's clearly unfair to levy a surcharge on tax that's already been paid... That's definitely harsh and excessive.

However, I would say that in my experience, where a taxpayer had a good track record and pleaded their case in a non-aggressive way, most Inspectors would be inclined to leniency...

What has your experience been?

What I meant in my post was, if they haven't let you off the hook from your informal pleading/ appeal, then you're flogging a dead horse...


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## selfassessed (13 Feb 2011)

mandelbrot said:


> What has your experience been?
> 
> What I meant in my post was, if they haven't let you off the hook from your informal pleading/ appeal, then you're flogging a dead horse...



I stopped flogging that horse ages ago and settled with the CG.  I overpaid tax in the year in question but filed my return late so they billed me the surcharge less the refund I was due.

My experience with revenue was that of talking to a brick wall.  I put my appeal in writing as they requested but they wrote back saying it was denied.  They said they had tried to contact me by phone but they hadn't - I had no missed calls.  When I phoned back the officer was unavailable.

Earlier in the same year they wrote to me demanding €20,000 for unpaid tax on stock options (7K tax, 13K penalties) which I declared many years ago.  I politely wrote to them and pointed out that the tax in question had been deferred and paid the following year and I had the submissions and receipts if they needed it (luckily I keep records longer than the recommended 7 years).  They phone me back and said it was ok, their records of stock options were "a mess".  I kid you not.  I also pointed out that if I was going to avoid tax I would hardly have made a declaration and that they really should be looking for non filers.  Maybe this ****ed them off and went on my record - who knows.

Anyway, the bandwagon I'm on now is to 1) raise awareness and 2) push for a change in the policy.

In terms of awareness I firmly believe that these surcharges are not widely known about.  The number of people who are shocked when they see massive surcharges being applied for late filing is testament to this.  My own accountant was flabbergasted and he has been in practise for years.

Secondly revenue are public servants and should I would have think strive to serve the public.  A revenue service that does not seek out non filers but instead slaps draconian surcharges on late filers is not a service I personally can be proud of.

I believe it would be possible for revenue to cross-reference with the CRO to find directors, cross-reference with share option issues by corporations and cross-reference rent relief payments to find landlords.  Then issue automatic reminders and flat fines to non filers.  In the UK the fine is automatic and must be appealed (eg. if you don't need to self assess you can have the fine waived AFAIK).

But here revenue wait until you declare and then nitpick over timeliness.  The system is broken and it is just no wonder to me that so many people slip through the net.


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## BarMcc (13 Feb 2011)

I have used the appeals process a number of times in share option cases and if Revenue feel there was a genuine mistake by taxpayer and it is a once off they are will to waive the surcharge. 

The surcharge is 10% of tax liability (excluding PAYE liability).  So if you have no other income apart from PAYE income no surcharge will apply.


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## selfassessed (13 Feb 2011)

BarMcc said:


> The surcharge is 10% of tax liability (excluding PAYE liability).  So if you have no other income apart from PAYE income no surcharge will apply.



No, the surcharge is 10% of the entire tax bill for the year in question regardless of how much has already been paid under PAYE.


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## mandelbrot (13 Feb 2011)

Barmcc is (I presume) talking about ordinary PAYE taxpayers, not self-assessed ones like proprietary directors.

My understanding (open to correction here, as I'm way too hungover to be reading the relevant Sections) is that the surcharge arises on the raising of an assessment. An ordinary PAYE taxpayer doesn't have to have an assessment issued - a P21 balancing statement is not quite the same thing as an assessment, so surcharge isn't an issue.


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## BarMcc (14 Feb 2011)

An ordinary PAYE taxpayer with share options is required to submit a self assessed return.  Revenue do issue a notice to assessment for these taxpayers.


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## mandelbrot (14 Feb 2011)

BarMcc said:


> An ordinary PAYE taxpayer with share options is required to submit a self assessed return.  Revenue do issue a notice to assessment for these taxpayers.



Thanks for clearing that up for me BarMcc - my understanding now is that a person becomes a chargeable person for a year, and must file a F11.

So strictly speaking the surcharge should apply if the return is late, and whether or not you can get it waived will depend on what District and what Inspector you deal with, and how good a negotiator you are!


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