On 4 July 2012, the Minister for Finance, Mr Michael Noonan, launched a public consultation on the tax implications of appointing a receiver. The consultation paper was jointly issued by the Department of Finance and the Revenue Commissioners and invited input by 4 September 2012 from interested parties in relation to technical and practical tax implications concerning the appointment of receivers.
The joint Department of Finance/Revenue Commissioners consultation team also invited bodies representing business and tax professionals to meet with the consultation team during the consultation period. The focus of the consultation concerns tax-related difficulties currently being experienced where a lender appoints a receiver over property or obtains possession of a property.
There are certain circumstances when a lender and/or receiver in enforcing a security can have a secondary liability for the taxes of the underlying borrower, for example, capital gains tax on a disposal of property over which it has a security interest or corporation tax on any rental income arising from the property of which it has taken possession. While it is not anticipated that there would be a fundamental change in law removing these potential liabilities from a secured lender it is expected that changes to the current law, where taxes can be visited upon the lender or receiver, will make it administratively simpler to calculate the potential liability without having to rely on the borrower to provide information.
The consultation paper includes a number of proposals and related questions and it recognised simplification and clarification as key objectives. Now that the consultation period has expired the expectation is that a submission will be made to the Minister for Finance with a view to making the necessary legislative amendments in Finance Bill 2013.