Tax avoidance

The consequences of engaging in tax avoidance

You should be aware that Revenue has sophisticated analytical tools to detect and tackle taxpayers using tax avoidance schemes. Revenue will always investigate and challenge tax avoidance schemes and will litigate cases up to the appropriate court if necessary.

If you enter into a tax avoidance scheme you are exposing yourself to significant costs, often greater than the potential tax advantage. You should also be aware of the disruption caused by Revenue enquiries, potential litigation and prolonged uncertainty about the outcome.

Revenue will examine any scheme to determine whether or not the scheme complies with the applicable tax legislation under first principles. This is outside of the General Anti-Avoidance Rule (GAAR). It should be noted that many of these challenges are successful. If so you will be found to have submitted an incorrect tax return, which could attract a penalty ranging from 3% to 100%.

A tax avoidance scheme may be challenged under either:

  • the GAAR contained in section 811C
  • specific anti-avoidance provision contained in Schedule 33.

You may be liable to interest and a penalty, or a 30% tax avoidance surcharge. There is no time limit on Revenue's powers to challenge a tax avoidance scheme under the GAAR.

If Revenue examines a complex transaction that suggests an ‘implementation fail’, there is no time limit on Revenue's power to investigate. An implementation fail is the taxpayer not correctly following the advice given.

Along with the penalty or surcharge you may also have:

  • to pay legal fees in court
  • your case heard in public
  • your name published on the list of tax defaulters.

You will already likely have paid fees to the advisor to put the scheme in place.

Payment notice

If Revenue successfully challenges certain transactions before the Appeal Commissioners we may issue you with a payment notice. A payment notice may only be issued to you if the scheme was either:

  • successfully challenged on the grounds that it was a tax avoidance transaction under the GAAR
  • successfully challenged under a specific anti-avoidance rule (SAAR) listed in Schedule 33, Taxes Consolidation Act 1997
  • or
  • should have been allocated a Transaction Number under the Mandatory Disclosure regime.

Revenue may issue payment notices to other taxpayers that have taken part in the same scheme or a similar scheme.

Next: Mandatory Disclosure regime