Law on tax issues arising from receiverships to be overhauled
THE Government has launched a public consultation process aimed at updating legislation related to tax issues arising from receiverships.
Some of the relevant tax legislation related to receiverships has not been updated in nearly 30 years. But the downturn has resulted in a spate of receiverships and an urgent need to clarify associated tax matters.
A number of difficulties have arisen, such as how rental income from a property to which a receiver has been appointed is taxed, for example.
David Keary, a director and tax consultant with Grant Thornton, said yesterday that in such circumstances it is possible that either the person who owned the asset, or the bank that had the receiver appointed, could have a tax liability in relation to the income.
The issue is further complicated because the liability is based on the borrower's tax position.
Mr Keary said that because more receivers are continuing to trade with assets rather than attempting to sell them, issues surrounding the liability of corporation tax have also arisen.
Tax clawbacks where a property may have benefited from a tax incentive scheme can also arise, but calculating what needs to be refunded to the Revenue Commissioners can be complicated.
"The legislation is effectively silent on whether corporation tax is paid by a receiver," he said.
The Government hopes the consultation process and subsequent amendments to legislation will clear up a lot of the loose ends.
"There's a certain element of playing catch-up with the economic climate," said Mr Keary. "The legislation hadn't been updated in many years. This is recognition that we need to address these issues now and bring some element of clarity to them."
He added that a lot of outstanding VAT issues related to receiverships have already been clarified by the Revenue.
Details on the consultation process can be found on the Department of Finance website.