January-30-2020 in Banking & Financial Services
The Finance Act 2019 (enacted on 22 December 2019) has provided welcome clarification to transferees of fixed charges.
Background
As those who hold fixed charges on the book debts of a company should be aware, the Revenue Commissioners of Ireland (“Revenue”) has, in certain circumstances[1], the ability to seek payment from a charge holder for certain liabilities of the charged company. This includes PAYE, VAT and or LPT liabilities of the company subsequent to the date of the charge.
These possible outstanding tax liabilities for the account of the charge holder can, however, be minimised where Revenue are notified within 21 days of the creation of the fixed charge on the book debts of the charged company (a “Section 1001 Notification”). Once a Section 1001 Notification has been made, the charge holder’s liability is limited to those liabilities incurred by the charged company after the Revenue has issued a “Notice of Default”.
Ambiguity
Until recently, ambiguity existed around the possible liabilities for those charge holders to whom an existing charge was transferred to pursuant to a loan sale or otherwise (a “Transferee”). In such circumstances a further Section 1001 Notification may have been made by the Transferee to Revenue. Such a notification requirement was not expressly provided for in the relevant legislation and it was unclear if the new charge holder could avail of the limitation of liability.
Clarity
S.72 of the Finance Act 2019 now provides that a Transferee can notify Revenue within 21 days of this transfer. Once such a notification is made, the Transferee’s liability is then limited to those liabilities incurred by the charged company after the Revenue has issued a Notice of Default.
Conclusion
It is important to note that this amendment has retrospective effect. Transferees have a short window of opportunity to make a Section 1001 Notification. These retrospective notifications must be received by Revenue on 31 January 2020 or within 21 days from the transfer of the charge if later.
For further information, please contact Michael Hanley mhanley@hayes-solicitors.ie or Danny Heffernan dheffernan@hayes-solicitors.ie at Hayes solicitors.
[1] Section 1001 – Fixed Charges on Book Debts Guidelines for Caseworkers - https://www.revenue.ie/en/tax-professionals/tdm/collection/enforcement/s-1001-fixed-charges-on-book-debts.pdf
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