August 2004

“IS&WFO Proposals on Taxation.”

You will be aware from previous correspondence that Revenue has adopted a different interpretation of the existing legislation regarding Share-Fishermen and in particular, on the issue of Capital Allowances. Revenue are stating that crewmen are entitled to a share of the Capital Allowances as partners under partnership law. Obviously, given that they have no financial involvement in the vessel, this is a very extreme and impractical view to be taking. In addition, it creates major financial difficulties, which would undoubtedly result in a reduction of investment in the Industry. We have engaged the services of Senior Counsel to review the matter. The opinion we received supports our view, we have been advised that we have a strong case should we wish to go to Court. This, we believe, would be the last resort in our attempts to solve this issue.

As an alternative approach, we have employed the services of Accountants and Tax Specialists to try to identify the most appropriate solution to the problem. After considerable deliberation, the advice we have received suggests that the Industry pursue a ‘Sub-Contractors’ type system, similar to that which exists in Construction and other Industries. This proposed system refers to circumstances where a contract for services exists between the vessel owner and crew, i.e. Self-Employed. Under this system it will still be the obligation of the Share-Fishermen to make their own tax returns and ensure their own tax affairs are in order. Under the proposed arrangement, crewmen with a history of tax compliance would receive a Certificate of Authorisation (C2) from Revenue. This will mean that the vessel owner can pay the Share-Fishermen their full share without deducting tax.

If crewmen don’t have a C2 Certificate, the owner must deduct 35% tax from any share payments to those Share-Fishermen. The vessel owner must remit the amount deducted to Revenue on a monthly basis. The Tax deducted will be credited to the tax affairs of the Share-Fishermen by Revenue. If Share-Fishermen feel that they are being excessively taxed at 35%, they can apply to Revenue to reclaim the excess.

We believe that this system represents the best practical solution for the Fishing Industry in view of the present Revenue concerns with tax compliance issues. We hope to receive support for this Proposal from all other Fishing Organisations. We will shortly be submitting the Proposal to the Department of Finance for consideration.