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Officials have power to penalise tax evaders with interest charges

PENALTIES: REVENUE officials have extensive powers to come down on people who have evaded tax.

People who have income which is not part of the pay as you earn (PAYE) system are expected under law to declare that income to the taxman.

When someone first gets a state pension, it states on the documents they receive that this payment must be notified to the tax authorities.

Anyone who is found to have evaded tax can be slapped with a penalty, be hit with a surcharge of up to 10pc of the unpaid tax, and have interest charged daily for tax that has gone unpaid.

Officials are entitled to carry out a tax audit of anyone they suspect of withholding tax.

This will involve picking a tax year and trawling through all bank details, receipts, statements outlining deposit interest received and other records.

If it is suspected that an incorrect tax return has been made, then officials can trawl back through the last four years of tax payments.

Senior tax manager with Ernst & Young, Catriona Coady said: "For individuals with other income who were obliged to file tax returns under self assessment, Revenue may seek to examine the submitted tax returns.


"Generally, a four-year time limit applies in relation to revisiting an individual's tax affairs by the Revenue."

If tax officials decide that there is tax owed, then interest of .0219pc a day can be imposed. This works out at almost 8pc over a year.

On top of this, a surcharge of between 5pc and 10pc can be imposed on the unpaid tax amount.

Revenue officials also have the power to impose a penalty. This is between €3,000 and €4,000.

There are also penalties for fraudulently or negligently making an incorrect return.

Generally, Revenue and the taxpayer will reach an agreement on an amount for penalties as part of a tax settlement, as court proceedings must be issued by Revenue to recover the penalties.

Ms Coady said that the vast majority of the 115,000 people who got Revenue letters saying they have underpaid tax would need to do nothing.

"The pensioners concerned are likely to be only in receipt of income subject to the PAYE system and would not be obliged to file tax returns," she said.

In these cases, Revenue will collect underpaid tax for previous years by way of adjusting the tax credits in future years.

"Such individuals who are not subject to the self-assessment system may not be subject to a surcharge or late payment interest.

"How Revenue treat such cases will very much depend on each individual's personal circumstances," the tax expert added.

Irish Independent