Tax Audits: New Code of Practice – Same Old Story

November 27, 2015

Revenue have recently updated their Code of Practice for Revenue Audits.

The new update applies from 20 November 2015 and replaces the previous Code issued in August 2014.

The most striking change (in paragraph 1.10.5)  is the new Revenue policy of reporting an accountant or tax agent to their professional regulatory body where they consider that their work during a Revenue Audit “does not meet the standards of a professional body“.

Portrait of crying baby

Needless to say, there is no corresponding measure to shop a dodgy tax inspector to a third party regulator.

If you encounter an incompetent, unpleasant or aggressive inspector, you can only complain directly to Revenue.

When it comes to tax audits, sauce for the goose is rarely sauce for the gander.

 

 


Revenue Warn Builders: “We’re Back!”

August 31, 2015

The Revenue Commissioners have warned builders and tradesmen to be on their guard in relation to tax compliance, as the construction sector slowly recovers from its long recessionary slump.

The collapse of the building sector following the 2008/09 crash was a catastrophe, not only for those working in and earning a crust from construction, but also for Revenue, who had enjoyed booming tax receipts from the sector in the Celtic Tiger bubble years.

In its eBrief last week, the tax authority announced that it is beefing up its “compliance interventions” programme for the industry, in order to ensure that the State benefits fully from the recovery.

This centres mainly on the online Relevant Contracts Tax (eRCT) system, in addition to VAT and Employers’ PAYE/PRSI.

Revenue to Builders - We're Back!

Revenue have now flagged the following key issues:

  • Operation of the eRCT system, including full reporting of payments to sub-contractors, and notification of “Unknown” sub-contractors;
  • Reconciliations of Home Renovation Incentive (HRI) applications with VAT returns;
  • Cross-checking of eRCT, PAYE/PRSI and VAT returns with reported profit margins;
  • Reviews of VAT Reverse Charge and PAYE/PRSI procedures;
  • More attention on the vexed question of classifying employees vs. subcontractors; and
  • A fresh focus on the treatment of non-Irish resident principal contractors & sub-contractors.

Once underway, the Revenue  “compliance interventions” programme will entail more:

  • aspect queries – requests for documentation and other specific questions
  • profile interviews – interviews focusing on the key tax “compliance risk areas” identified by Revenue based on the taxpayer’s profile.
  • revenue audits – full examinations of tax returns and claims.
  • unannounced visits to construction sites.

Revenue are strongly encouraging builders and tradesmen to review their tax compliance, and regularise any shortcomings before they take action.

In many cases this will entail making an “unprompted voluntary disclosure” and settling tax, penalties and interest liabilities.

If you are going down this road, I strongly recommend that you first arm yourself with appropriate professional assistance and ensure that your proposal complies with the Revenue Audit Code of Practice.


Are Revenue Really Using PAYE Audits to Fish for Third-Party Data?

August 18, 2015

“Revenue are doing audits of PAYE taxpayers who got one-off single-house planning permission and demanding details of all payments to tradespeople.”

…according to Aidan Clifford in the Sunday Independent at the weekend.

I haven’t yet heard of this happening. If if it is, I’d be very, very alarmed.

Revenue Audit

The purpose of a Revenue Audit is to audit a tax return. It should never be merely a general trawl through a private individual’s personal expenditure.

And if Revenue are auditing PAYE taxpayer returns with the sole intention of fishing for information on non-business spending, there’s a good chance they’re violating both their own Code of Practice and their wider data protection obligations.

If you’ve a grievance over the conduct of a Revenue Audit, you can use their complaints procedure.


Contractor Appeals Hit Revenue Tax Project

January 20, 2014

The Sunday Business Post yesterday reported that the Revenue’s ongoing National Contractors Project has run into problems, as increasing numbers of contractors formally challenge Revenue assessments raised against them.

The Revenue investigation was launched last year in response to alleged tax evasion on the part of contractors and professionals working through their own companies in the technology, software and pharmaceutical industries. It started last January in the Munster region and was extended nationwide in Spring 2013.

Appeal Commissioners Revenue Contractors Tax Project

Revenue audits had revealed that some contractor companies were claiming excessive expenses against their tax bills, with claims for motor & travel and associated home office costs in the spotlight.

Revenue then “invited” contractors to make voluntary disclosures of their tax underpayments, including interest and penalties.  A significant number of contractors came forward to do so and it was once speculated that the entire project could yield up to €100m for Revenue.

However Business Editor Ian Kehoe has now revealed that a number of contractors have faced down Revenue, maintaining that their tax affairs and accounts deduction claims are fully in order.

In addition, Dun Laoghaire-based tax consultant Dermot Byrne recounted in yesterday’s paper the case of one contractor who demanded that Revenue raise a tax assessment, in order to enable him to formally challenge the assessment through the Appeal Commissioners, in line with the Revenue Code of Practice for Revenue Audit.  Revenue then backed down and dropped their case against the contractor and his company.

The lesson for contractors is clear: if you feel aggrieved with Revenue’s treatment of you and your business, you can challenge them at the Appeal Commissioners.

It goes without saying that Appeals are only advisable with the benefit of professional advice. Bear in mind the old saying “A man who is his own lawyer has a fool for a client“. But, if you don’t look after and protect your own interests, who will?

Ian Kehoe’s & Dermot Byrne’s articles yesterday can be accessed by purchasing a Sunday Business Post subscription, starting at €2.69 for a single edition.


Revenue Warning Letters to Issue to Tech Companies

June 17, 2013

Revenue are poised to issue tax warning letters to technology contractor companies by the end of June, in the latest phase of their ongoing investigation into the sector.

This is according to an update issued by Chartered Accountants Ireland to its members today.

Revenue Probe Tech Contractor Companies

The Revenue “Services Contractors Project” targets companies which provide contracting services to a larger company. Its main focus is on the level of expenses claimed against taxable income.

Revenue believe that at least some expense claims are excessive and have previously invited companies based in the South-West region (counties Cork, Limerick, Kerry and Clare) to review their tax returns and settle any underpayments along with interest and penalties.

If you have a liability, you can avail of lower penalties by completing an Unprompted Qualifying Disclosure and settling the liability.

However, you must do this before Revenue notify you of an impending audit. Once you are notified of an audit, this option is no longer available, and you are then restricted to completing a less attractive Prompted Qualifying Disclosure.

If  you feel this may affect you, you should review your situation immediately, preferably with your tax advisor. You should also consider getting independent professional advice – if only for your own peace of mind.

For more on the Revenue “Services Contractors Project”, see my previous blog posts on this topic.

For more on Qualifying Disclosures see the Revenue Code of Practice for Revenue Audit

Today’s Chartered Accountants Ireland update is here.


Revenue Tax Probe of Contractors Goes Nationwide

March 11, 2013

The recent Revenue review of independent contractor companies in the South West region is now to be extended nationwide, according to a report today from Chartered Accountants Ireland.

Their new “Services Contractors Project” targets companies which operate as a vehicle to enable individuals to provide contracting services to a larger company.

Revenue

Revenue’s Assistant Secretary Tony Buckley wrote to the Irish Taxation Institute in January confirming that their review of contractors had already commenced in the South West region (counties Cork, Limerick, Kerry and Clare) and was “likely” to be extended to other Revenue Regions in due course.

Revenue’s main concern seems to be that some companies may be charging an unduly high level of expenses against their taxable income.

Of course there may be valid reasons for a company to have significant deductible running costs, but Revenue’s focus is on those cases where expenses may have been exaggerated.

They have already invited contractors in the South West region to review their affairs and make voluntary disclosures of any tax underpayments.

Disclosures must also include interest, and 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.

It now appears that contractors nationwide will now be asked to undertake this review, and to make good any tax underpayment.

If you have concerns about your own position, you should review the implications of this news with your accountant or tax advisor, and if necessary, seek independent professional advice, as soon as possible.

Today’s Chartered Accountants Ireland report is here.


Revenue Resume Pensioners Tax Hunt

February 8, 2013

Revenue are once again pursuing pensioners with tax arrears, a year after their Chairperson apologised for causing confusion and distress to senior citizens.

Today’s Revenue eBrief to accountants announced a fresh investigation into pensioners’ tax affairs.

They confirm that they are comparing pensioners’ tax returns against Dept of Social Protection (DSP) pension payments data. They will then identify pensioners who have undeclared or under-declared their State pension income.

This exercise covers the 2010 tax year and prior years.

Tax & Pensioners

Revenue are now inviting accountants to review their pensioner clients’ tax return records to ensure their DSP pension incomes are correctly declared.  Otherwise, the provisions of the Code of Practice for Revenue Audit will apply.

These include an obligation for an individual with tax arrears to make a Qualifying Disclosure of their liability and pay the sum outstanding along with interest and penalties.

Failure to do so can leave the taxpayer with increased penalties, further interest charges and possible publication in the Tax Defaulters List.

Happily, the majority of pensioners are exempt from income tax.

If you are aged 65 or older, and your total annual income amounted to less than:

  • €20,000 (single/widowed) or
  • €40,000 (married/civil partner)

in the tax years 2007-2010, you will be fully exempt from income tax in those years.

From 2011 onwards, these limits are:

  • €18,000 (single/widowed)
  • €36,000 (married/civil partner).

If you have tax concerns in relation to your pension income, you can allay your fears by obtaining quality professional advice.