Can someone explain Interest and Penalty on wrongfully claimed tax credits

[Poormans]

Hi all, a few years back I read (incorrectly it seems) that we could finally claim tax relief on child maintenance. It made sense to me at the time since I had to earn up to €1000 Gross to pay €500 child maintenance out of my NET pay. So I went to Revenue and put in the amount I paid each year and got some tax back on those years. In the last few weeks Revenue contacted me about a compliance check and asked about the maintenance. I explained what it was and they said I cannot claim relief on child maintenance and they said I have to pay back the money.

If I was in the wrong claiming it then I have no issue paying back the money they gave me but I would like some clarification on the what they are asking for.

For each year 2016 - 2019 they sent me the amount I owed (liability) but also interest and a penalty.
Example:

Year	Liability	Interest	Penalty
2016​	4440.56​	1495.3​	222​

It is the Interest and Penalty that I would like explained.

What is the interest value for exactly? 30% seems very high for any interest rate. Is it money they would have made from a bank if that money was in an account instead of being give to me? And conversely if I made a tax claim for 2016 for 10000 do they calculate the interest on the claim as if that 10K was in my account instead of them having it?

The penalty however is what really annoyed me. As I said I have no issue paying back what was not mine to begin with but they explained the penalty as "A penalty has been applied to this liability. The amount of the penalty is based on the nature of the behaviour that led to the default which in this case is considered to be deliberate. " This implies that I made the original claim knowing that I should not, essentially trying to commit fraud or theft and that was definitely not the case. I made the claim in error because I had the wrong information. Whatever about the interest I feel like if I pay the penalty I am admitting to being guilty of that accusation.

Any advice appreciated.
Thanks

 

[Tickle]

What is the interest value for exactly? 30% seems very high for any interest rate.

The interest charged is 0.0274% per day or circa 10% per annum. Over the three years in question that would amount to about 30%, so I'd say it's bang on actually. FYI, the clock hasn't stopped on that so the interest is still building up

https://www.revenue.ie/en/tax-professionals/tdm/collection/agents-guide/agents-guide-to-collector-general.pdf

 

[relax carry on]

Hi all, a few years back I read (incorrectly it seems) that we could finally claim tax relief on child maintenance. It made sense to me at the time since I had to earn up to €1000 Gross to pay €500 child maintenance out of my NET pay. So I went to Revenue and put in the amount I paid each year and got some tax back on those years. In the last few weeks Revenue contacted me about a compliance check and asked about the maintenance. I explained what it was and they said I cannot claim relief on child maintenance and they said I have to pay back the money.

If I was in the wrong claiming it then I have no issue paying back the money they gave me but I would like some clarification on the what they are asking for.

For each year 2016 - 2019 they sent me the amount I owed (liability) but also interest and a penalty.
Example:

Year	Liability	Interest	Penalty
2016​	4440.56​	1495.3​	222​

It is the Interest and Penalty that I would like explained.

What is the interest value for exactly? 30% seems very high for any interest rate. Is it money they would have made from a bank if that money was in an account instead of being give to me? And conversely if I made a tax claim for 2016 for 10000 do they calculate the interest on the claim as if that 10K was in my account instead of them having it?

The penalty however is what really annoyed me. As I said I have no issue paying back what was not mine to begin with but they explained the penalty as "A penalty has been applied to this liability. The amount of the penalty is based on the nature of the behaviour that led to the default which in this case is considered to be deliberate. " This implies that I made the original claim knowing that I should not, essentially trying to commit fraud or theft and that was definitely not the case. I made the claim in error because I had the wrong information. Whatever about the interest I feel like if I pay the penalty I am admitting to being guilty of that accusation.

Any advice appreciated.
Thanks

The interest looks about right. The tax figure is quite high. What was the gross figure you claimed?

If the tax figure is 4400 and the penalty charged is 222; that is a 5% tax geared penalty which would be called careless behaviour with significant consequences. 10% would be deliberate behaviour. Note that tax geared penalties range from 3% to 100%. There is also the possibility of a section 864 fixed penalty of 3000 euro per claim for making an incorrect return.

How did you make the claims? If you used the online service, when you went to claim the relief, there would have been a sentence or two explaining what the relief was with a link for further info. You would have digitally signed the return at the end which has a notice along the lines of "I am entitled to claim these reliefs etc".

The code of practice below has penalty tables regarding how penalties are applied as well as the charging of interest.

https://www.revenue.ie/en/self-assessment-and-self-employment/documents/code-of-practice-revenue-audit.pdf

 

[Poormans]

Thanks for the info guys. I made the claim through the Revenue website. I had read on another financial advice website, cant remember where now, where to go. It said you can put in for Child Maintenance under the Maintenance option. Obv that wasnt true. Wish I could remember the site now and report them.

One more question, Revenue has asked me to pay 70% of it now and 30% in reduced tax credits over the next 3 years (2021-2023). Which make better financial sense.. I think I would prefer to take out a loan and pay the 100% off immediately and get it over with rather than messing with my tax credits but would the 70-30 be a better option (ignoring interest on the bank loan)? As in would I see a huge reduction in my wage packet in 2021?

Thanks again

 

[Sunny]

You can't get relief on any maintenance for your children but if you have been ordered to pay maintenance to your former partner, you can claim relief on that and your partner will have to declare income. It has to legally enforceable agreement though.

You can argue against the penalty if you like but is it worth it? You made a false claim even if it was just a mistake. The advice on tax treatment on this is pretty clear.

 

[relax carry on]

Thanks for the info guys. I made the claim through the Revenue website. I had read on another financial advice website, cant remember where now, where to go. It said you can put in for Child Maintenance under the Maintenance option. Obv that wasnt true. Wish I could remember the site now and report them.

One more question, Revenue has asked me to pay 70% of it now and 30% in reduced tax credits over the next 3 years (2021-2023). Which make better financial sense.. I think I would prefer to take out a loan and pay the 100% off immediately and get it over with rather than messing with my tax credits but would the 70-30 be a better option (ignoring interest on the bank loan)? As in would I see a huge reduction in my wage packet in 2021?

Thanks again

Be great if you could find that website which was giving that advice. It might help making case for reducing the penalty. Paying up front should theoretically be cheaper as the interest rate charged by Revenue would be higher than that of a bank.

 

[Poormans]

Tell me about it. I decided to pay the balance in full to get it over with. Thanks for the information everyone