Conor Bradbury, Sonya Manzor

The Mandatory Disclosure regime was introduced in 2010 to provide Revenue with early information on tax avoidance schemes, how they work and who has availed of them. The regime has been amended by the Finance Bill 2011 and amended regulations which set out the operational aspects of the regime.

The amendments introduced by the Finance Bill 2011 and the regulations propose that:

• the commencement date of the regime will be amended from 3 April 2010 to 17 January 2011;
• a transitional period of 3 months will apply before the first disclosures have to be made to Revenue;
• a promoter will not be required to include client details on a promoter client list to Revenue, where the promoter is satisfied that a client has not implemented or entered into a scheme which would fall within the regime (a promoter is likely to be an accountant, solicitor, bank or financial institution); and
• there will not be a requirement to disclose relevant documentation (e.g. prospectus, diagram) when making a disclosure to Revenue.

The regime imposes an obligation on the promoter of a scheme, which falls within the regime, to disclose the scheme to the Revenue within a specified time limit. If there is no promoter or the promoter is outside Ireland or a promoter is claiming legal professional privilege, then the duty to disclose is on the person who has entered into the scheme. Where a promoter is a legal professional claiming legal professional privilege, that promoter is obliged to inform their client that the client is obliged to disclose the transaction.

Classes of transactions that must be disclosed include:

• schemes creating losses for individuals, where such losses are expected to be used to reduce liability to income tax;
• schemes creating losses for companies where such losses are expected to be used to reduce liability to corporation tax;
• employment schemes that seek to avoid income tax or to obtain a corporation tax advantage;
• schemes converting income into capital with a view to avoiding the higher rate of income tax; or
• schemes converting income into gifts with a view to avoiding the higher rate of income tax.

The time period to report a disclosable transaction to Revenue is 30 working days where there is no promoter and 5 working days in all other cases from the date the scheme is made available to or entered into by a client.

It is Revenue’s intention that the mandatory disclosure rules should only apply to aggressive tax avoidance schemes and that day-to-day tax advice provided by tax advisors to clients would not be subject to the regime.