As we have discussed previously, this year’s Finance Bill includes another massive clamp down on possible tax evasion by allowing the Revenue greater access to previously confidential information. In addition to this, there will now be greater measures in place to address current loopholes in Capital Gains Tax. These loopholes can result in major discrepancies which make it difficult to assess taxation in general and the consistent avoidance of payment creates larger financial issues.
Section 34 of this year’s Finance Bill is designed to tighten the definition of shares deriving their value from specified Irish assets for non-residents. The current loophole allows avoidance of Capital Gains Tax when cash is transferred to a company prior to disposal of shares. This means that when the time comes for shares to be disposed of, their value is derived mainly from cash rather than assets. In cases where the greater value lies in shares than assets, the company can avoid paying this tax.
Section 35 of the bill also limits the avoidance of paying Capital Gains Tax as it closes an existing loophole which allows for non-payment of this tax where a non-complete clause has been signed. Similarly, in section 36 of the bill, a provision has been made which prevents avoidance of the tax through transferring property to non-resident companies.
Another loophole which has previously resulted in the avoidance of paying Capital Gains Tax is a provision which defers the tax if companies are sold within a larger group. The new bill includes a section which puts an end to the misuse of this particular provision (section 38 of the Finance Bill).
These measures are designed to counter avoidance of this tax and others, and as our technology advances we are sure to see further measures put in place in future Finance Bills as the Government ramps up its efforts to counter tax evasion. Since the onset of the financial crisis, there has been a consistent effort to put an end to tax evasion, occasionally to the detriment of other seemingly more crucial issues such as the housing crisis. It is hoped that creating preventative measures such as these will be enough to stem the flow of current tax evasion and prevent future efforts at avoidance, rather than creating further loopholes which will need to be closed off. This will, in turn allow the financial focus to shift elsewhere.
If you are concerned about your status in paying Capital Gains Tax, or indeed any form of taxation and require some professional advice regarding your financial matters please don’t hesitate to drop us a line here at DCA Accountants