An amendment made by the Finance Act 2019 (enacted 22 December 2019 but only recently published) has created a new security filing which transferees of fixed charges on book debts should consider as a matter of priority.
A transferee (“Transferee”) of a fixed charge on the book debts of an Irish company (a “charge”) must now send a notification (a “s1001 notification”) to the Irish Revenue Commissioners (“Revenue”) if it wishes to limit the scope of its potential liability for certain overdue tax liabilities (relating to employee income tax, VAT and local property tax, “relevant liabilities”) of the company that granted the charge.
While it is standard practice for the relevant charge-holder at the time of creation of such a charge to make a s1001 notification, a Transferee of that charge may (but would not necessarily) have made a further notification to Revenue in respect of its transfer (and such notifications were not previously provided for in the underlying legislation). Even where a Transferee did make such a further notification, it may not have included all of the required information (set out in further detail below).
Background: what does section 1001 do?
Section 1001 of the Taxes Consolidation Act 1997 (“s1001”) is an infamously convoluted provision. Broadly summarised:
The amendment to s1001 effected by the Finance Act 2019 was to extend (from 22 December 2019) the s1001 notification mechanism to Transferees.
It is important to note that this extension of the s1001 notification mechanism has retrospective effect. To exclude liability in respect of amounts received prior to its receipt of a Revenue Notice in connection with any charge transferred to it, including one transferred before s1001 was amended on 22 December 2019, a Transferee must make a s1001 notification in respect of that charge. The deadline for making retrospective s1001 notifications in respect of charges already transferred to a Transferee is due to expire shortly, on 31 January 2020 (or within 21 days of the transfer of the charge if that is later).
To make a s1001 notification (whether on the creation or transfer of a charge), the relevant charge-holder must provide the following details in writing to Revenue:
This information must be provided through Revenue’s online service, which requires registration on the relevant Revenue system.
For Transferees such as loan portfolio purchasers and security trustees replacing existing security trustees, the amendment effected by the Finance Act 2019 may be considered as both good and bad.
From a positive perspective, a Transferee now has a clear statutory mechanism which it can use to ensure that it has the protection afforded by a s1001 notification when it acquires charges. Whereas certain Transferees may, prior to 22 December 2019, have made notifications to Revenue regarding charges transferred to them (and, in practice, the validity of any such notifications was not challenged by Revenue on the basis that no express provision was made for them by s1001), it was not clear that making such notifications afforded any protections to Transferees.
Less positively, the obligation to make s1001 notifications retrospectively within a very short time (by 31 January 2020) is likely to be considered as posing a significant administrative challenge, especially if all of the required details (including tax numbers) are not readily available.