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Redress for Taxpayers (Special Report)

Chapter 2 - Time limits on retrospective refunds of tax

Chapter 2

Time limits on retrospective refunds of tax

Legislation

Part XXXIV of the Income Tax Act, 1967 (ITA 1967) is entitled "Repayment" and comprises Sections 496 to 498. Section 498 provides:

"Save as otherwise expressly provided by any provision of this Act, no claim for repayment of income tax under this Act shall be allowed unless it is made within ten* years next after the end of the year of assessment to which it relates."

*Section 498 of ITA 1967 originally specified a time limit of six years; this was amended to ten years by Section 4(5) of the Finance (Miscellaneous Provisions) Act, 1968.

The 10 year limit specified under Section 498 applies to all claims for repayments which are not expressly provided for by any other provisions of ITA 1967. For example, in Sections 191 and 307 of the Act, alternative time limits to the ten year rule are provided for. There is also a reference to overpayments in Section 1(2) of Schedule 2 which sets out the rules in relation to Schedule E tax.

Section 133 of ITA 1967 details the circumstances where the obligation on the part of the Revenue to issue annual assessments in respect of income under Schedule E (i.e., any remuneration, salary, etc., received from all offices and employments together with pensions and annuities) will not apply. The section provides:

(1) No assessment under Schedule E for any year of assessment need be made in respect of emoluments to which this Chapter applies except where �
(a) the person assessable, by notice in writing given to the inspector within five years from the end of the year of assessment, requires an assessment to be made,
(b) the emoluments paid in the year of assessment are not the same in amount as the emoluments which fall to be treated as the emoluments for that year, or
(c) there is reason to suppose that the emoluments would, if assessed, fall to be taken into account in computing the total income for sur-tax purposes of a person who is liable to sur-tax or would be so liable if an assessment were made in respect of the emoluments.

(2) Where an employer pays to the Revenue Commissioners any amount of tax which, pursuant to this Chapter and any regulations thereunder, he has deducted from emoluments, he shall be acquitted and discharged of the sum represented by the payment as if he had actually paid that sum to the employee."

Under Section 133(1)(a), therefore, the obligation on the Inspector of Taxes to issue an assessment is restricted to instances where notification is given in writing within five years of the end of the year of assessment.

Case Law

In November 1988, the High Court decided in the case of Ó Coindealbháin (Inspector of Taxes) v Breda O'Carroll [1988] ITR 221, that the children's portion of a Garda Síochána widow's pension was the beneficial property of the children and should not be assessed as income of the surviving parent. In O'Carroll, Lynch J. considered a case stated by an Appeal Commissioner concerning the liability to income tax of a contributory pension granted to Mrs Breda O'Carroll on the death of her husband, a member of the Garda Síochána.

Under the Garda Síochána Pensions Order, 1981 (S.I. No. 199 of 1981), a widow's contributory pension became payable to Mrs O'Carroll on the death of her husband. Under the same order, a children's contributory pension was also granted in respect of each of her three children and, as the children were in her care, the children's contributory pensions were paid to Mrs O'Carroll. The Inspector of Taxes decided that Mrs O'Carroll was liable to income tax on these payments and the tax was calculated by aggregating the amount of the children's contributory pensions paid to her with her other income.

Mrs O'Carroll disputed this decision and appealed to the Appeal Commissioner who decided that the sum representing the children's pensions paid to her should not be assessed as her personal income. Following an appeal against this determination by the Revenue, the High Court ruled that the Appeal Commissioner was correct. The Revenue considered the question of an appeal to the Supreme Court but decided against it.

The High Court ruling had implications not only for all open and all future income tax assessment cases but also for settled cases. In essence, the ruling determined that the sum representing the children's pensions paid to the mother should never have been subject to income tax as the income of the mother and the tax, as a consequence, should be rebated. There was no reference in O'Carroll to limiting such rebates to the plaintiff alone. This was in contrast to Murphy v Attorney General [1982] IR 241, a case which dealt with the tax treatment of married couples where the Court expressly limited the application of the judgement in order to avoid excessive disruption to the public finances.

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