Revenue are now reviewing the tax affairs of limited companies and directors who provide contracted services to a larger company or group.
They have this week written to the Irish Tax Institute, confirming that that their review has already commenced in the South West region (counties Cork, Limerick, Kerry and Clare) and is “likely” in due course to extend to other parts of the country.
Revenue state that they have already found “a significant understatement of tax liability” in many cases, which they attribute to “deficiencies in accounting for input costs and expenses”.
They are now inviting contractors to make voluntary disclosures of their tax underpayments, including interest, and the following penalties as set out for “deliberate default” in the Code of Practice for Revenue Audit:
- unprompted disclosure (i.e. where no audit or investigation notice has issued) – penalty of 10% of the tax underpayment.
- prompted disclosure (made after receipt of a audit notice) – 50% penalty;
- failure to make a complete disclosure, 75% – 100% penalty.
In the coming weeks, contractors, and their tax advisors, will need to carefully review the implications of this news.