Beware: Tax return deadline approaching fast

The extended deadline also applies to capital gains tax returns due to be filed for the 2017 calendar year, and returns covering inheritances and gifts received in the year to August 31, 2018, only where the tax returns and tax payments are made online.

Where only one of these actions is completed through ROS, the extension does not apply, and the required date to submit both returns and payments is no later than October 31, 2018.

Failure to meet the deadline increases the risk of an audit, results in an automatic 5% penalty, rising to 10% for returns filed more than two months from the original filing date, and additional interest charges applied to the tax liability due.

Persistent failure to file a return can result in prosecution and fines.

While no one takes pleasure in parting with hard-earned money, it’s fair to say that the Revenue Commissioners are extremely good at their job of collecting what is due, on time, and no more than what is due.

You might disagree with the tax system in Ireland, and feel that you pay more than your fair share, but take solace from the fact that the tax system is fair amongst equals.

Two entirely separate taxpayers earning the same level of income in the same circumstances will have identical tax liabilities.

The Revenue Commissioners are tasked with collecting whatever tax is due according to the laws enacted by the minister for finance, and his or her supporting government.

That said, many farmers will be licking their wounds when settling with the tax man for 2017.

But you can’t change the past. What profit was earned in 2017 is a matter of fact at this point.

Damage limitation is difficult.

But options worth considering though include:

• - Would a change in the accounting year reduce taxable profits?
• - Have all expenses, including cash expenses, been included?
• - Is the value of machinery trade-ins offset against new assets?
• - If in a farm partnership, has the profit sharing ratio changed for the year?
• - Can you factor in any additional expenses paid in the following period but referable to the 2017 accounting period?
• - Can you claim stock relief?
• - Is opting into or out of farm averaging appropriate, is a temporary opt-out of benefit?
• - Have all appropriate tax credits been claimed in full?

After mitigating the tax liability as best one can, if the tax payments due to Revenue are likely to result in cash flow difficulties, it is important to plan how the liability will be settled.

Revenue will, at their discretion, offer taxpayers a formal or informal phased payment instalment arrangement which gives a tax payer more time to settle.

However if the return is not filed on time (ahead of the October 31 deadline), the penalty for not filing on time will apply automatically, adding to the amount due.

Revenue charge about 8% per annum interest for the instalment arrangement and usually demand at least 25% of the liability amount up-front.

Furthermore, interest charged by Revenue is usually calculated from October of the previous year (when preliminary tax should have been paid). This means that the total cost of a phased payment instalment arrangement can work out rather expensive. Filing a return and simply not paying the liability isn’t an option, unless you fancy getting on a first-names basis with the county sheriff.

Some financial institutions offer tax financing at very competitive rates. For instance AIB’s Promptpay facility allows taxpayers to spread the cost over 11 months, with such facilities typically costing about 5%. In addition, the facility can cover accounting fees.

If you intend financing your tax bill for 2017, you will need to have your accounts prepared well ahead of the October 31 deadline in order that you have sufficient time to apply and get approval for your facility.