Help, the Revenue want my blood!

Help! The Revenue has changed their mind and now want an extra 6k in tax from me!

I own an investment property with my sister. My name was on the mortgage, but not on the title deeds at the beginning (as I was out of the country when we Bought it). That aside we decided six months ago to sort out this problem and get my name on the deeds (i.e. title transfer of 50% of house). But we decided to do an equity release at the same time. The reason was two fold: We needed the money and by releasing equity on the property we could increase the mortgage and therefore increase the amount you would be able to set off against half the market value for Capital Acquisition Tax. I and my solicitor agreed this situation (laid out in situation B below, by phone with the revenue), but now they have come back and said no you can't set this equity release off! I would not have done this release if I had known that they would change their mind!
Please help! What should I do? Should my solicitor have made this clear before? Have a I got a right to complain against them! Can I appeal against the revenue? How would I do it?

The difference between what I had originally agreed with the Revenue (in B) and what they have now told me (A) means a hammering of 6k in CAT! What now!

Value 400k
Mortgage 240k
(A) Without equity release tax situation would be:

(1) Transfer of half of property: 200k
(2) Less half of mortgage: (120k)
(3) Gift before relief 80k
(4) Less Consanguity relief (45k)
(5) Less small gifts exemption (3k)
(6) Taxable gift 32k
(7) Tax at 20% 6k

(B) With equity release the line number (2) above would rise to approx 170k, therefore
(1) Transfer of half of property: 200k
(2) Less half of mortgage: (170k) (with equity release)
(3) Gift before relief 30k
(4) Less Consanguity relief (30k)
(5) Less small gifts exemption n/a
(6) Taxable gift 0k
(7) Tax at 20% 0k
Any help would really be appreciated!

Without even looking at the figures, I can tell you two things:

I doubt if you ever agreed anything with Revenue. It's more likely that you asked a question and were given advice. Whether that advice was right or wrong is immaterial as you now know. Revenue does not give that type of advice.

Unless you are using a tax qualified solicitor you should always go to a tax advisor for tax advice.

Please don't duplicate posts. I've deleted the duplicate that you posted in the Property Investment forum.

Agreed Ham Slicer, I was under the impression that I had agreed the approach by the Revenue, rather than the precise numbers involved. That is why I'm posting this question. I was told that the Revenue does not give anything in writing. To me though, this is just not fair. I am asking therefore for advice on any appeals process that is available to me. Surely they cannot give wrong advice and then change their minds and be allowed to do this! Just because they are a government department does not absolve them from accountability. Or is this just Ireland?

I do think that it is very material that the advice was wrong in the first place. Very material to my financial situation. I would NEVER have taken this course of action had I known. I did not go to a qualified tax advisor as my solicitor agreed the approach by phone to the Revenue. My solicitor did not get a name from the Revenue. She submitted the tax impact to me prior to agreeing to do this. Would I have any recourse to my solicitor?

You will find it impossible to enforce 'accountability' on the Revenue in this case as (1) you have nothing in writing; (2) you don't even have the name of the person who gave you the information.

Your solicitor should have told you to get specific tax advice. Notwithstanding the fact that she did not do so, I doubt if she is in any way liable for your tax bill. In previous court cases, individuals sued banks and bank officials for giving them misleading tax 'advice'. These cases were thrown out because the courts ruled that banks are not tax advisors and the individuals should not have relied on their 'advice' as a substitute for proper professional advice.

Your problems are only starting. If this is treated as a disposal by your sister, she has a CGT liability.

While I would not criticise the solicitor in this case, it is fair to say that the tax issues which arise in this situation are within the competence of many solicitors. If it is not too late, you should try to cancel this transaction and start over - but first take full and proper tax advice from either a solicitor or accountant who has detailed knowledge of stamp duty, capital gains and capital acquisitions taxes. This is most definitely one situation where the proper expertise could save a lot of money.

And please note that Revenue are not looking for your blood - just the taxes that are due.

Cubman, with the greatest of respect, the Revenue are blood hounds these days, noting that Dr 'Stripper' Barry had his case on 'lapse of time' upheld in Europe, when Revenue go after single premium policies 25 years after they first knew about them, demonstrates to me what we are dealing with.

Some fine people there, but some very strange things going on there at the moment.

For example 100 page document on DIRT guidance, and yet €BNS of 'securitisation' and 'bond' interest paid to anonymous investors in Europe free of DIRT. Yes thats 'balance'!

Meanwhile: If our poster gets all his facts assembled, he could appeal this to Appeal Commissioners (probably lose) and then go to Circuit Court and the Revenue will probably lose.

I would act and get a competent adviser asap.
Any delay and I would fear an audit.

WizardDr said:

Cubman, with the greatest of respect, the Revenue are blood hounds these days

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OK - perhaps you can you clarify precisely where Revenue are incorrect in this specific case in looking for taxes that seem to be due?

The UK Revenue lost a case where the taxpayer argued that the loan against the property was the issue and not the purpose.

The Revenue arrive late to the fire, because they put in weak legislation to begin with, and then retrospectively adopt practices that were not envisaged at the time and then fail to remedy a poor situation. I say again look at the Guidlelines on Non Resident Accounts. They should simply abolish the concept and instead introduce a direct scheme with themselves without involving the Banks.

Tax law is getting so complicated, that people paying PAYE are not aware of the raft of legislation and complications that are creeping in.

Yet putting in place Benefit In Kind - one major item was omitted. CAR PARKING spaces. Is it a surprise that this benefit is largely accruing to civil servants? And Revenue were not going to take that on.

I'm still not clear if/where Revenue are out of order in looking for payment of taxes in this specific situation. Perhaps you can clarify?

WizardDr said:

CAR PARKING spaces. Is it a surprise that this benefit is largely accruing to civil servants?

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This is an exaggeration. Almost every office (public sector & private sector) and factory in the land with the possible exception of city-centre offices has parking spaces for their employees.

You also seem to be forgetting that Revenue don't write the law or make the policy. You'll have to look towards Dept Finance for that. Revenue just implement.

This is an exaggeration. Almost every office (public sector & private sector) and factory in the land with the possible exception of city-centre offices has parking spaces for their employees.

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Yes, but what proportion of public and private sector offices are in Dublin city centre? (Whatever happened to decenteralisation?) This is most certainly a very real benefit for employees. It would be interesting to find out how many public sector workers do benefit.

Free parking is a thing of the past in many towns across Ireland.

umop3p!sdn said:

Free parking is a thing of the past in many towns across Ireland.

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Not for employees, it's not.

"She submitted the tax impact to me prior to agreeing to do this. Would I have any recourse to my solicitor?"

Your solicitor gave you a tax impact prior to you carrying out this transaction. Not knowing exactly what was in this tax impact it appears that your solicitor wrongly told you there were no tax implications. You paid for her advice which she gave to you in writing. This advice was wrong and made you liable for tax that you would not have incurred if she had not given you wrong advice. In my view your solicitor should be liable.

If she wants to blame the Revenue Commissioners for her giving you wrong advice then that is a matter for her and should not be your problem.