Will a mislabelled bank transfer come back to haunt me?

Q&A: I am concerned it may be considered income to me if it is noticed by Revenue

‘Revenue’s interest is to ensure that it collects the tax it is due from individuals and corporate entities.’ File photograph: Nick Bradshaw

‘Revenue’s interest is to ensure that it collects the tax it is due from individuals and corporate entities.’ File photograph: Nick Bradshaw

 

My brother-in-law sent around €9,500 to my account recently from the United Arab Emirates. He sent it from his workplace and, due to a tagging error, it appeared in my account as consultancy fees.

He sent it to me to give as a loan to a friend of his. As the loan was subsequently not required, I transferred the whole amount to his account here in Ireland.

I am concerned now that it may be considered income to me if it is noticed by the Revenue Commissioners.

Does the bank report these types of credits to the Revenue Commissioners? Do the Revenue Commissioners have a means of learning about such credits? If there is such a risk, what should I do? My brother-in-law is not a resident of Ireland.

Mr MD, email

Revenue does have fairly broad access to information about people’s bank affairs if it chooses to exercise such powers. These are generally focused on tax evasion and money laundering.

However, I believe you may be overthinking things in relation to this mistagged deposit.

Revenue’s interest is to ensure that it collects the tax it is due from individuals and corporate entities. It is not in the business of taking advantage of genuine errors.

Does the bank have to report such deposits? No, unless it suspects they are an exercise in money laundering.

Does Revenue have a means of learning about such deposits? Yes. Its concern is focused on satisfying itself that this money is not income you earned abroad and did not declare for tax purposes.

In this case, money was deposited in your account with the intent of being passed on as a loan to a friend of your brother-in-law. The transaction was essentially one between your brother-in-law and his friend.

In the event, the loan was not required and the money was sent on to your brother-in-law’s own account in this State.

It was not a payment to you, you did not benefit from it, and in no way could it be fairly described as income for the purposes of your own tax position.

Could Revenue query the lodgment? Yes, but you have a perfectly reasonable explanation for it. Revenue’s more likely concern, if any, would be to ensure that the passing of the money through your account was not an exercise of money laundering in which you might be complicit. Again, given the open nature of this transaction, I think this is most unlikely.

None of this means you are wrong to check your position. You should record the details of the transfers into and out of your account, together with their purpose, and keep them with your tax files just in case you should find yourself subject to a Revenue query or audit. As we all know, it can be difficult to recall precise details of such transactions a couple of years down the line.

I am puzzled why, given he had an account here himself, your brother-in-law didn’t simply channel the money through that?

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.

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