Job Losses to Follow Taxman Squeeze on Sheriffs

June 17, 2016

Revenue have today announced an important change to the way they use Sheriffs to collect outstanding taxes.

Up to now, each Sheriff had a period of six months to collect the money owing on a warrant issued by Revenue.  This period has now been cut to three months.

Revenue curb Sheriffs

This change means that Sheriffs will now be much quicker to collect tax bills once a warrant has issued for them.

They will also have far less scope to allow individuals and businesses to settle bills gradually.

This is very bad news, particularly for the many businesses who experience short-term cashflow pressures and who occasionally are unable to settle their Revenue liabilities as they become due.

Although many people have a natural and terrible dread of having to deal with Sheriffs,  I have found over the years that they and their staff are usually very helpful, constructive and understanding in assisting taxpayers to manage and settle their debts to Revenue.

This change will inevitably put more pressure on Sheriffs to be the opposite.

It is bound to cause more business failures and job losses.

As if we didn’t have enough of both.

For more, see the new Revenue Guidelines for Sheriff Enforcement.


Revenue Attack Home Office Company Expenses

July 26, 2013

Revenue have today announced new rules for mileage and subsistence expense claims by individuals who provide services to third party customers via a limited company.

Revenue Attack Home Office Company ExpensesThe main purpose of the updated rules seems to be to prohibit an employee or company director from claiming expenses in respect of travel to and from a home office – even if this is a company’s registered office or administration location.

It appears that valid expense claims may be entertained for travel between client locations, but not in any circumstances between the person’s home and the third party customer’s premises.

The new rules are contained in a Revenue Tax Briefing issued today.

They are likely to have significant ramifications for small business owners.

I would be concerned that they will make it considerably harder for many businesses to make ends meet, and they may well render some jobs (and possibly entire businesses) unviable.

They also appear, at first glance, to discriminate against companies operating from a home office. A director of such a company operating in, say, Dublin will now be unable to claim motor or subsistence expenses for business trips to Donegal or Kerry.

On the other hand, if the company rents a non-home office premises 100 metres away from the directors’ home, the entire expenses will be allowable.

This appears neither sensible nor just.

The full implications (and legality) of the new rules will only become clear in due course.

If you are likely to be affected by the new rules, you should consider seeking professional advice on their effects in the near future.


Who Leaked Lowry “Tax Raid” Report to RTE?

July 25, 2013

RTE News are today reporting that “the Revenue Commissioners have raided the home of Independent TD Michael Lowry”.

I find this report very puzzling, and I’m at a loss to understand how this news came into RTE’s possession.

RTE "Michael Lowry's home raided by Revenue Commissioners"

I presume Mr. Lowry didn’t tell them – even if he had the time and inclination, I can’t understand why he would do so.

After all, having one’s home raided by the taxman is an inconvenience that people generally prefer to keep to themselves.

And I am equally certain that Revenue didn’t tip off RTE either. After all, their Customer Service Charter reassures taxpayers of “Consistency, Equity and Confidentiality” as follows:

“Revenue will treat the information you give us in confidence and ensure that it will not be used or disclosed except as provided for by law.”

This generally means that if Revenue raid your neighbour’s home, it won’t feature on the national news. Yet Mr. Lowry’s latest tax discomfort has now somehow become public.

All very puzzling indeed.


Revenue, Techies & The Bart Simpson Paradox

January 31, 2013

Tech contractors are this week anxiously reviewing their contract and tax arrangements following last Friday’s news of a looming Revenue crackdown on the sector.

They and their advisors will be grappling with a range of complex issues, some of which contradict each other.

Revenue & Tech Contractors

An interesting contradiction lies at the heart of a major issue flagged by Revenue last week, as follows:

“For the moment, our concern is that in many cases too small a proportion of the gross contract payment is reported as liable to tax in the hands of the contractor. Into the future, this will continue to be the subject of frequent checking, and will be a factor in risk-based selection for audit.”

Essentially Revenue are stating here that, if your contracting business has significant overheads, they will suspect you of evading tax.

This seems to directly contradict Revenue’s own Code of Practice for Determining Employment or Self-Employment, which lists the various factors that indicate whether a worker is an employee or a contractor running their own business.

Among the criteria that suggest that they are self-employed, are that the worker:

  • “Provides the materials for the job.
  • Provides equipment and machinery necessary for the job, other than the small tools of the trade or equipment which in an overall context would not be an indicator of a person in business on their own account.
  • Has a fixed place of business where materials, equipment etc. can be stored.
  • Provides his or her own insurance cover e.g. public liability cover, etc.”

Now, if a contractor provides all these component functions in the course of their contract work, these will all cost money, ie overhead costs. These costs represent the difference between the contractor’s gross turnover and their net profits.

For a contractor who provides their own materials, equipment and insurance, and runs their own business premises, these overhead costs may be significant. Yet Revenue’s letter now tells contractors that if their companies have such large overheads,  they will be treated as suspected tax dodgers!

It looks like Revenue are presenting contractors with a classic Catch-22: Unless you incur overheads, you’re not a contractor at all. And if you incur overheads, you’re a suspected tax dodger.

As Bart Simpson once said:

Life is a paradox, You’re damned if ya’ do, and you’re damned if ya’ don’t.

bart-simpson-08


Contractor Companies Face Revenue Probe

January 25, 2013

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

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.

The Institute of Tax website includes a pdf copy of the Revenue letter while you can also find a full transcript here.


Revenue’s Letter on Contractor Companies -In Full

January 25, 2013

The following is a full transcript of Revenue’s letter to the Irish Tax Institute confirming that they are “reviewing the tax affairs of companies and their directors” in the South West Region.

The Irish Tax Institute have separately published a pdf copy of the letter here.

Revenue

“Mr Mark Barrett Chairperson
South West Representatives
Irish Tax Institute                                                     22 January 2013

Dear Mark

I am writing in response to queries from yourself and other tax practitioners about the current project in the South West Region concerning various contractors. I would be grateful if you would inform the relevant ITI members of the contents of this letter, which sets out our position as clearly as I can. If I have overlooked any issues, please let me know.

Revenue in the South West Region (Cork, Limerick, Kerry and Clare) are currently reviewing the tax affairs of companies and their directors, where the main source of income is a contract or contracts “for service” with a larger company or companies (directly or through intermediaries), the company in question does not appear to have a substantial business separate from these contracts, and in most cases the director(s) are the only employees of the company and pay tax through PAYE. To date, we have established that in many cases there are deficiencies in accounting for input costs and expenses, with the result that there has been a significant understatement of tax liability to the benefit of the director(s). As a result of these findings, this area will continue to be a significant focus of Regional inquiries through 2013, and it is likely that similar explorations will be initiated in other Regions.

Because of the nature of the underdeclaration, we take the view that the provisions of the Code of Practice for Revenue Audit require us to regard the underdeclaration as stemming from deliberate behaviour. This has the consequence that an unprompted disclosure (i.e. where no notice of audit or investigation has been received) attracts a penalty of 10%; a prompted disclosure made after receipt of a notice of audit is penalised at 50%; and failure to make a disclosure, or to make a complete disclosure, moves the penalty to between 75% and 100% of the tax underpayment. Of course, all underpayments also attract interest from the date of default.

A full disclosure, whether prompted or unprompted, avoids publication. If however the disclosure is incomplete, is not accompanied by full payment, or otherwise fails to meet the requirements described in the Code of Practice for Revenue Audit, then all benefits of disclosure are lost.

In order to facilitate and encourage disclosure, and to ensure a consistent approach to all cases, we have decided not to carry out in-depth checking of disclosures where the disclosure matches existing Revenue information and the general profile for the industry sector concerned. We have also decided that the penalty rates set out in the preceding paragraph will apply subject to exceptional circumstances. Where exceptional circumstances are claimed, a special case will need to be formally made to the Revenue caseworker, who will make a recommendation for decision at Assistant Secretary level.

The definition of “qualifying disclosure” is contained in Section 2.7 of the Code of Practice for Revenue Audit. Naturally, we will take a reasonable approach to the level of detail required, but all significant matters must be included, and payment or an acceptable proposal for payment is also required. If we accept a disclosure and the accompanying payment, we will also accept that the taxes and periods covered are those relevant, and will not look at earlier periods. If however, there are firm reasons to believe that the disclosure is significantly deficient, we retain the right to audit any and all relevant years and taxes.

In the normal course, where an audit is required, it will cover the four complete years preceding the date of issue of the notice of audit. Extension to other years will, as in all audits, depend on the circumstances of the case, but will be unusual. Likewise, there is a possibility of prosecution where audit shows a blatant breach of legal provisions but this will, we hope, be rare.

Changing taxpayer behaviour is a very important consideration in all compliance initiatives, and this is no exception. At the moment, we are not expressing an opinion on whether the arrangements we encounter are valid, that is, whether the company directors should more properly be regarded as direct employees of the entity awarding the contract. This question is being reviewed and may be adressed in the future. For the moment, our concern is that in many cases too small a proportion of the gross contract payment is reported as liable to tax in the hands of the contractor. Into the future, this will continue to be the subject of frequent checking, and will be a factor in risk-based selection for audit.

I hope the foregoing makes our position clear, and I look forward to the co-operation of your members in assuring correct and tax-compliant behaviour in this large and growing area.

Yours Sincerely

Anthony Buckley

Assistant Secretary South West Region”


Taxman’s Big Brother Plan to Tackle Fuel Criminals

January 23, 2013

A tough Revenue crackdown on fuel smuggling and laundering is now underway. This month sees the introduction of a new fuel movements e-reporting system for all petrol, diesel and oil traders.

All fuel warehouse operators, distributors and forecourt retailers must now file online, a monthly Monthly Return of Oil Movements (ROM1) showing, for each fuel product type:

Taxman's Big Brother Plan to Tackle Fuel Smuggling

  • Opening fuel stock balance.
  • Closing fuel stock balance.
  • Date, quantity, invoice, supplier details for each fuel stock movement inwards.
  • Similar details  for each fuel stock movement outwards.
  • Aggregate details for forecourt fuel sales.
  • Aggregate details of sales to domestic customers and smaller commercial customers who receive less than 2,000 litres per month.

All Auto Fuel Trader’s Licence and Marked Fuel Trader’s Licence holders must now be registered on the ROS system and must use ROS to file their ROM1 returns.

The requirement for traders to report each individual movement of fuel is intended to make it much harder for illegal fuel smugglers and launderers to market their product through legitimate fuel retailers.

It will now be very easy for Revenue to match the dispatch of each fuel consignment from a wholesaler or warehouse to its receipt by forecourt retailers and end users. Tax officials will also be ready to pounce if and when they notice unrecorded fuel movements along the public roads and where unexplained gaps or anomalies within traders’ returns indicate a risk of illicit behaviour.

The ROM1 system represents the latest strand of Revenue’s Strategy for combating the illegal oils trade, and follows recent lobbying by legitimate petrol retailers for action to stamp it out.

I expect that it is also an indicator of Revenue’s likely strategy to combat tax evasion and other business criminality in the future.  With a vast, and ever-expanding, range of Big Brother-style technology at their disposal, it is now easier than ever before for Revenue to monitor and detect all illicit business activity – and it’s only a matter of time before the criminals and dodgers have nowhere left to hide.