Ireland's tax authorities say they have no choice but to require 4,000 Standard Life shareholders to pay up to €1.3 million of their recent €2.7 million payment from the company in tax after letters got lost in the post.

The Irish investors in the former mutual life insurer had told the company they wished to receive their share of a £1.75 billion payout as capital to ensure they did not have to pay tax on the money.

The company said it never received those notifications. As a result, the 4,000 or so shareholders in question were paid the money as a special dividend, liable to income tax, USC and PRSI, depending on individual circumstances.

The money was part of a return of capital by Standard Life, managed by its share registrar Capita, following the £2.2 billion sale of its Canadian business last September.

However, in response to queries from The Irish Times last Friday, Standard Life admitted a batch of forms had arrived at Capita's office between April 7th and 9th, weeks after the March 18th deadline, even though they had been posted well ahead of that date.

It is talking to An Post and the Royal Mail to find out how the letters were so badly delayed. However, as the payments had already been sent, Standard Life said it was not possible to revisit the method of payment. It said it would contact Revenue to explain the background to the problem.

But, in a statement, Revenue said it had no latitude in how it viewed the payments to shareholders.

“How Standard Life make the return of value payments will determine the tax treatment that must be applied by Revenue, as this is prescribed by legislation.”

When a large number of Vodafone shareholders similarly failed to have their preference to receive a windfall payment as capital last year, Minister for Finance Michael Noonan made a special provision in his 2015 budget to ensure they would not face a tax bill. However, that legislative amendment was restricted to Vodafone.