1. Filing Deadlines
It is coming into that time of year when the annual tax returns for self-assessed or self-employed individuals are due. Self-assessed individuals are required to file a Form 11 income tax return with Revenue in respect of their 2022 income by 15 November 2023, where they file online using the Revenue Online Service (“ROS”). For paper versions, the deadline date is 31 October 2023. The Form 11 is a more detailed and, dare I say it, burdensome return than the Form 12 return that can be filed via Revenue’s MyAccount Service. In summary, the Form 12 is for individuals who only have employment income taxed through the Pay As You Earn (“PAYE”) system and non-PAYE net income of less than €5,000 in a calendar year.
Recent statistics returned by Revenue in their 2022 annual report show that there were 839,433 registered for self-assessment tax in Ireland in 2022, an increase of 11,192 on the 2021. This figure includes individuals, partnerships, trusts and estates. A comparison of Revenue’s 2022 annual report to the last report pre-Covid in 2019, shows an increase in the self-assessed income tax and USC tax take of €683 million, which is a whopping 27% increase. The annual increase in the income tax registrations along with the significant increase in self-assessed income tax/USC tax take could be “low-hanging fruit” for Revenue compliance interventions or audit queries, if they were to target, say, individuals who may or may not have a tax advisor/agent to assist them with their Form 11 returns. In this article, we will focus on the compliance obligations for Individuals in respect of their 2022 income.
2. Persons required to file a Form 11 return – Chargeable Persons
Irish legislation dictates that “chargeable persons” are required to file a Form 11 each year but did you know that as well as self-employed individuals, this category also includes the following:- Individuals who were granted share options by their employer during the year.
- Individuals who opened a foreign bank account during the year.
- Individuals who have a PAYE source of income along with net income from non-PAYE activities of €5,000 or more.
- Individuals who have a PAYE source of income along with gross income from non-PAYE activities of €30,000 or more.
- Individuals who are proprietary directors in a company (a proprietary director is a director whose shareholding is 15% or greater in the company).
- Individuals who have relocated to Ireland and whom are relief under the Special Assignee Relief Programme (“SARP”).
3. Payments Required for Chargeable Persons
Payment of the outstanding 2022 tax liability is also due by the 31 October 2023, which is extended to 15 November 2023.
A chargeable person is obliged to make an advance payment of their tax liability for the tax year. This is known as preliminary tax. The individual is obliged to make the payment by 31 October in the tax year, which is usually extended to the middle of November where the individual files their return via ROS.
If we take the point of view of “chargeable persons” in 2023, in order to avoid interest the amount of the preliminary tax payment must amount to at least one of the following:
- 90% of the tax payable for the tax year in question (being tax payable from non-PAYE activities for 2023), or
- 100% of the tax payable for the previous tax year (being tax payable from non-PAYE activities for 2022), or
- 105% of the tax payable for the pre-preceding tax year (being tax payable from non-PAYE activities in 2021). In order to avail of this option a direct debit arrangement must have been put in place in the pre-preceding year (2021 in our case).
4. Penalties for non-compliance
In order to incentivise individuals to file their income tax returns and make their associated income tax payments on time, Revenue will impose penalties for late filing of income tax returns and late payment or underpayment of income tax liabilities.
Non-Filing of returns
A late filing surcharge will be imposed where a Form 11 is not filed by the due date of 31 October 2023, or the extended deadline date of 15 November 2023 where filing via ROS. The surcharge applicable where a return is filed less than two months late, i.e. before 31 December 2023, is 5% of the tax liability for the year, subject to a maximum surcharge of €12,695.
Where a return is filed more than two months late, the surcharge is 10% of the tax liability, subject to a maximum surcharge of €63,485.
Non-Payment or underpayment of tax liabilities
Where a payment of an outstanding tax liability is late or indeed underpaid, Revenue may impose a late penalty interest amount on the outstanding tax liability from the date the tax is due for payment.
This penalty interest is a daily rate of 0.0219% (8% per annum) of the outstanding tax liability, which will be backdated to the date that preliminary tax was due in respect of the year and not the tax return date, i.e. 31 October 2022 in respect of the 2022 income tax return.
