Revenue Audits & Investigations

A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.

In Association with:-

Online CPD for Accountants &
Professional Advisors

Revenue Audits and
Investigations

Presenter:
Liam Grimes

CPDStore.com

Unit 3, South Court, Block D, Iveagh Court,
Wexford Road Business Park, 5 – 8 Harcourt Road,
Carlow. Dublin 2.
059 9183888 01 4110000
www.OmniPro.ie www.CPDStore.com


Revenue Audits and Investigations

&

Budget 2012

Supporting Documentation Index

Contents Page

Slide Set 1 – 61

Code of Practice for Revenue Audit 62 – 139

Budget 2012 Briefing 140 – 154


Revenue Audits

History to date

• 2002 Code
• “The Patch”
• 2010 Code

OmniPro Education & Training Page 1 of 154


2010 Code of Practice - Overview

• S.1086(4) – verbal disclosure – gone
• Legislative footing
• Notice of Opinion
• No Loss of Revenue (NLOR)

Chapter 1
Overview of Revenue Audit

• Revenue’s primary objective is to promote
voluntary compliance with all taxes

• Audit programme’s role is detecting and
deterring non-compliance



Functions of Audit Programme

• Determine accuracy of returns, claims
• Identifying and collecting tax, interest and penalty
• Identifying cases for publication
• Specifying remedial action to taxpayers
• Considering procedural changes to facilitate counter-
evasion
• Referral of cases for investigation and prosecution

What is a Revenue Audit?

It is an examination of:
• A tax return
• A declaration of liability or repayment claim
• A statement of liability to Stamp Duty
• The
Th compliance of a business with l i l ti
li f b i ith legislation
It may be multi or single issue
It usually involves an examination of books, records
and linking papers



Selection Process

• REAP
• Third party information
• Follow-on from other Revenue interventions
• Bad compliance history
• Random
• Sectoral audits

1.4 eAuditing

• Becoming more prevalent
• Involves electronic examination of electronic systems
• Uses data interrogation software
• All digital information extracted should be stored on
g
encrypted storage devices



1.4 eAuditing

• Confidentiality of client information/data
• IT expertise
• Security
• Pre-audit meeting to review system is not “start”
of audit

1.5 Unannounced Visits

• Not an audit
• Power contained in S.905 TCA 1997
• Emphasis on cash businesses



1.5 Conduct
of Unannounced Visits

• Usually Revenue “Team” will target a particular
town/area/shopping centre
• Two Revenue officials call to business
• Endeavour to speak to proprietor but are entitled to speak to
staff
t ff
• Cannot speak to customers

1.5 Unannounced Visit Checklists
Includes questions around:
• Number of tills
• If no tills – what systems for recording sales
• Operation/reconciliation of tills
• Control/recording of cash pay outs
• Employee details
• Property ownership details



1.6 Investigations

• Not covered by Code
• Audits can ‘migrate’ into investigation

1.7 Notification of a
Revenue Audit

• Will be in writing
• Will clearly state “Notification of Revenue Audit”
• Will clearly state nature and scope of Audit
• Minimum of 21 days notice
• No longer possible to make “Unprompted Qualifying
Unprompted
Disclosure” once notification received



Other Revenue Interventions

The following are not notifications of a Revenue Audit:
• Unannounced Visits
• Assurance checks
• Sectoral review letters
• Profiling letters & interviews
o g ette s te e s
• Letter/phone call requesting back-up documentation
=> Still possible to make Unprompted Qualifying Disclosure
(UQD)

Chapter 2

Regularising Tax and Duty Defaults



2.2 Self-Correction
Returns can be self-corrected without penalty where:
• Written notification to Revenue
• Compute & pay correct tax & interest
• VAT underpayments of less than €6,000 (previously €5,000)
can be corrected in next return – no penalty, interest or
notification required
• Beware time limits
• Not available if notified of audit and/or investigation
• Does not apply for repeat deliberate behaviour

2.3 Innocent Error

• No penalty if “Innocent Error” claim proven
Factors
• Tax default not deliberate
• Not due to failure to take reasonable care
• Tax at issue less than €6,000 (previously €3,000)
• Proper books & records kept
• Compliance record/frequency of errors
• Materiality



2.4 Technical Adjustments

• No penalty if “Technical Adjustment” claim proven
• These are adjustments that arise from differences in
interpretation

2.4 Technical Adjustments

Factors:
• Significance of tax consequences
• Due care has been taken
• Interpretation was reasonable
• Complexity of issues involved
• Court and Appeal Commissioner decisions
• Guidance available
• Expression of doubt - Gone



2.5 No Loss of Revenue (NLOR)

• Significant change from 2002 code
• 2002 code NLOR Restricted to VAT in group situations
• Penalty was the lesser of 3% or €60,000
• Did not apply where there were suppressed sales or a
general failure

2.5 NLOR

2010 code provisions
• Onus of conclusive proof on claimant
• May be difficulties in getting the necessary third party
information
• Revenue will not supply third party details/information



2.5 NLOR

NLOR claims will not by accepted where:
• Default is in deliberate behaviour category
• General failure to operate tax system
• Case not proven
• No co-operation
• Default is in careless behaviour category and there is
neither a qualifying disclosure or co-operation

2.5 NLOR

Consideration taken into account
• General compliance record
• Repeat NLOR claims history
• Previous claims history
• Steps taken to prevent re-occurrence



2.5 NLOR

Where NLOR claim is accepted:
• Tax will not be collected
• Interest may be sought but limited to period of temporary
loss of revenue
• Penalties will be charged in accordance with new table -
capped

2.5 NLOR
2010 code provisions new penalty table
NLOR TAX DEFAULT CATEGORY OF DEFAULT NLOR QUALIFYING DISCLOSURE

All “careless behaviour” NLOR tax defaults where there is a “qualifying Prompted qualifying disclosure and Unprompted qualifying disclosure and
disclosure” co-operation co-operation

First qualifying disclosure in this category Careless behaviour Lesser of 6% or €15,000 Lesser of 3% or €5,000

Second qualifying disclosure in this Careless behaviour Lesser of 6% or €30,000 Lesser of 3% or €20,000
category

Third or subsequent qualifying disclosure Careless behaviour Lesser of 6% or €60 000
€60,000 Lesser of 3% or €40 000
€40,000
in these categories

NLOR TAX DEFAULT CATEGORY OF DEFAULT CO-OPERATION ONLY

All “careless behaviour” NLOR tax Careless behaviour Lesser of 9% or €100,000
defaults where there is no “qualifying
disclosure”



2.5 NLOR

Innocent error and technical adjustments
• A penalty will not apply where non-operation due to
“innocent error”
• Non application of a penalty will be considered where non
Non-application non-
operation due to “technical adjustment”

Disclosure and its effect on
settlement of audits
2002 Code:

• Qualifying Disclosures (prompted & unprompted)
• Voluntary Disclosures (S.1086(4)(a) TCA 1997)
• Categories of Default: Deliberate Default
g
Gross Carelessness
Insufficient Care
• Benefit of Co-operation



Disclosure and its affect on settlement
of audits
Finance (No.2) Act 2008

Three new categories of default:
• Deliberate Behaviour
• Careless behaviour with significant tax consequences
• Careless behaviour without significant tax consequences

Importance of co-operation brought forward to 2010 Code

Penalties for Tax Defaults
• Penalty Table 1 – Paragraph 4.6.2
- Default post 24 December 2008

• Penalty Table 2 – Paragraph 4.6.4
- Default prior to 24th December 2008

• Relevant table determined by reference to the actual
contravention, not by commencement date of audit



2.6 Qualifying Disclosure

• Defined in legislation – S.1077E(1)

Key differences –
• Voluntary/verbal disclosure removed
• Must be in writing – enforcement?
• Ri k of getting it wrong
Risks f tti

• Benefit of avoiding Prosecution and Publication

• Prompted v. Unprompted – determines level of penalty

2.7 Definition of Qualifying Disclosure

• A qualifying disclosure is “a disclosure of complete information in relation
to, and full particulars of, all matters occasioning a liability to tax that gives
rise to a penalty”

• Must be made in writing, signed by or on behalf of the taxpayer and be
accompanied by:
– a declaration that to the best of that person s knowledge,
person’s knowledge
information and belief, that all matters contained in the disclosure are
correct and complete
– a payment of the tax or duty and interest on late payment of that tax or
duty




• More onerous than definition in 2002 code

• There should be no situations in practice where an agent should sign a
disclosure on behalf of a client
– i.e. plain or client’s paper

• No requirement to make a self assessed determination of a penalty or pay
this over as part of a disclosure. However, the category of default is still
relevant in determining the form of the disclosure

• “Voluntary Disclosure” no longer an option – interaction with inability to
pay (S.4.9)


What periods and tax heads must be addressed as part of the audit?

• Deliberate behaviour/Deliberate Default
- all tax heads and periods

• Careless behaviour/Gross Carelessness/Insufficient Care
- relevant tax heads and periods

• Unprompted qualifying disclosure in the Careless Behaviour/Gross
Carelessness/Insufficient Care category
- tax heads and periods subject of the disclosure




• Merging of old and new categories of default

• Appropriate penalty regime determined by when the contravention
occurred

• Date the disclosure is made determines the form of disclosure required,
rather t a t e date of default
at e than the o de au t

• New disclosure regime applies to all disclosures made after 24th
December 2008


• Extension of scope of audit
• Revenue’s approach is to concentrate on the tax periods in the audit
notice
• Benefit of prompted qualifying disclosure available where auditor formally
extends the scope of the audit (on foot of a new audit letter)
• Benefit of unprompted qualifying disclosure where the audit is not formally
extended and attention drawn by auditor to issues not within the initial
scope
• No requirement for taxpayer to make a self-assessed determination of
penalty, but still a requirement to assess which category of default applies
for the purpose of determining what the disclosure must relate to (i.e. tax
heads and periods)



2.7.1 Related Liabilities

• Cases not involving deliberate default/deliberate behaviour –
clarification

• Where an auditor pursues related liabilities, benefit of
prompted qualifying disclosure applies

• Requirement for agents to monitor progress of an audit to
determine if an additional disclosure should be made

2.7.2

• Liabilities not within the initial scope of the
audit

• Benefit of unprompted qualifying disclosure for
non d lib t d f lt/b h i
deliberate default/behaviour



2.7.3 Qualifying Disclosure and
Calculation of Penalties
• Disclosures post 24 December 2008 – payment of tax and
interest only

• Penalty paid subsequently once agreed (wording of section
misleading if read in isolation)

• Revenue Notice of Opinion procedures – S.4.5

2.7.4 Qualifying Disclosure and
Payment
• Liability to tax and interest MUST be paid to be a qualifying disclosure

• Broader issue of inability to pay (s.4.8 and s.4.9)

• “Real, genuine and accepted proposal to pay the agreed liability” will
suffice (change from 2002 Code)

• Failure to honour phased payment arrangement may result in prosecution.
It is hoped that this will not be applied where there is a genuine change in
circumstances of the taxpayer



2.7.5 Qualifying Disclosure and Non-
Publication
• Qualifying disclosure secures non-publication and reduced or
mitigated penalties

• Mitigation will depend on type of disclosure, category of
default, previous disclosures and level of co-operation

• S.2.10 - specific exclusions preventing a disclosure from
being treated as a qualifying disclosure

2.7.7 Qualifying Disclosures and
Companies
• Audit of one company in a group does not prevent another
company in the group from making an unprompted qualifying
disclosure

• Where notification of the extension of the audit is issued,
benefit of unprompted disclosure not available
p p

• Good practice to review all aspects of a group and affairs of
directors where one company in the group receives
notification of an audit



2.8 Definition of a “Prompted Qualifying
Disclosure”
• Disclosure made after the issue of an audit notification letter
and before the commencement of the audit (s.1077E (1) TCA
1997)
• Audit notification must be in writing
• Revenue auditor should continue to ask at the start of a
meeting if th t
ti the taxpayer i t d t make a qualifying
intends to k lif i
disclosure
• Date of letter can often be source of frustration

2.9 Definition of an “Unprompted
Qualifying Disclosure”
• Must be made before the commencement of an
investigation/inquiry or before the issue of an audit notification
letter (date on letter)

• Notification must be in writing and should not be confused
with a verification letter, aspect q y p
p query, profile interview etc.



2.10 Exclusions – Disclosure not regarded as
a Qualifying Disclosure
Disclosure not a “qualifying disclosure” in the following circumstances:

• Revenue had started an audit or investigation before the disclosure is
made (practitioners should ensure client has received the notification in
writing)
• Matters in the disclosure were known to Revenue or in the public domain
(subjective test)
• Qualifying Disclosure is incomplete – full, true and accurate test failed
• Disclosure is given verbally

2.11 Second, Third and Subsequent
Qualifying Disclosures
• 2002 Code: Restriction of mitigation of penalties for second qualifying
disclosure under the deliberate default or gross carelessness category. No
mitigation available for third or subsequent disclosure
• New penalty tables in paragraphs 4.6.2 and 4.6.4 for pre and post 24th
December 2008 defaults
• Qualifying Disclosures is the careless behaviour without significant
co seque ces catego y a e e e cou ted
consequences category are never counted when calculating the number of
e ca cu at g t e u be o
qualifying disclosures made by a taxpayer
• Exclusions for situations where there is a change of ownership
• Subject to “5 year rule”



2.12 The 5 Year Rule regarding Qualifying
Disclosures
• Finance (No2) Act 2008 – where a taxpayer makes no additional qualifying
disclosures within five years of a previous qualifying disclosure, the count
starts again – S.1077E
• A Qualifying Disclosure can only be a second qualifying disclosure if there
was a liability to the specific tax head in the first qualifying disclosure
• Disclosures in the Careless Behaviour without significant
consequences/insufficient care category are never counted

2.13 Period to prepare a Qualifying
Disclosure
Unprompted Qualifying Disclosure:
• Taxpayer can avail of additional 60 days once notification given
• Allows taxpayer the opportunity to assess / discuss category of default and
/ or raise funds

Prompted Qualifying Disclosure:
• Notification within 14 days not required for a disclosure to be a
qualifying disclosure
• Only required to obtain the additional 60 days



2.14 Examination of Qualifying
Disclosures
• Similar to position under 2002 Code

• All prompted disclosures will be examined to verify the details disclosed

• Only a section of unprompted qualifying disclosures

• Examination of a qualifying disclosure is treated as a Revenue Audit

• Disclosure still valid where discrepancies are insignificant

2.15 Qualifying Disclosures – Requirements
Summary Chart
• No requirement to self assess penalties

• Legislation now provides that where an individual does not
take steps to correct an error that has come to his/her
attention the incorrect return shall be treated as having been
deliberately made
y

• This should not imply any “intent” at time of original error was
made



2.16 Co-Operation Only – No Qualifying
Disclosure
• Mostly the same as 2002 Code provisions

• Welcome clarification that auditors will provide any assistance required by
taxpayers to enable them to co-operate with the audit including allowing
them reasonable time to fully reply to correspondence

• Benefits of co-operation should still be available where no disclosure or an
incomplete disclosure is made

2.17 Capital Gains Tax Valuations -
Penalties
Mitigation of penalties by reference to
following criteria:
• Establish difference (“A”) between agreed valuation (“B”) and
original valuation proposed
• If “A” is not greater than “B” x 30% – no penalty
• If “A” is greater than “B” x 30% but not greater that “B” x 50% -
careless behaviour without significant consequences or
insufficient care



2.17 Cont’d

• If “A” is greater than “B” X 50% but not greater than “B” x
60% - careless behaviour with significant consequences or
gross carelessness
• If “A” is greater than “B” x 60% - deliberate behaviour or
deliberate default
• Revenue acknowledge difficulty in obtaining accurate
valuations

2.18 Capital Acquisitions Tax and
Stamp Duty Valuations
• Legislative provisions for surcharges
• S.53 CATCA 2003
• S.15 & S.16 SDCA 1999



2.19 Arrears of Declared Taxes and
Duties

• Auditors will require payment of all unpaid taxes and
submission of all out standing returns
• “Tax Creditor” in Form 11’s and CT1’s should always be
reviewed

2.20 Maintenance of Adequate Records

• Obligation to keep proper books and records rests with
each taxpayer
• Failure to keep proper books and records may have
serious consequences
• Can lead to a criminal prosecution, which is outside the
p ,
scope of the code
• Julie will deal with this in more detail



Chapter 3

The Revenue Audit

Introduction
• Ensure client has a copy of the letter once you receive it

• Brief client on implications, responsibilities and “logistics”

• Prepare for the meeting

• Broadly similar to 2002 Code, except for the omission of
sections on “collection of arrears” and “records” and the
insertion of a section dealing with Data Protection



3.1 Location of Audit
• Audits carried out by local Revenue district, unless there are “operational
reasons”

• Reference to conducting the audit at an agent's office now removed

• Audit will be conducted in the local tax office where holding it in the
ta paye s p e ses ou d
taxpayer’s premises would be impractical or cause serious inconvenience
p act ca o se ous co e e ce

• S.905(2)(e) TCA 1997: access to private residence only allowed with
consent of taxpayer or on foot of a warrant

3.2 Conduct of Audit
• Aspect Queries – points of issue may be pursued in an audit but not
prevented from making prompted qualifying disclosure
• Assurances on Revenue’s data security guidelines
• Taxpayer will be advised of his/her entitlement to make a prompted
qualifying disclosure right up until the time that the examination of the
books and records commence
• List of procedures and checks to be conducted by auditor
• An audit of a director owned company includes an audit of the director’s
tax affairs. All parties to the audit will receive notification
• S.8 FA 2010 – Credit for tax available to directors



3.3 Materiality in Audit Settlements

• Wording identical to 2002 Code

• Where a taxpayer’s returns are substantially correct,
the Revenue auditor will terminate the audit

• Materiality is always subjective, but does allow for
some leeway

3.4 Obstruction
• Series of steps to be followed by the auditor to obtain co-
operation

• 2010 Code provides that immediate action may need to be
taken e.g. need to secure records. Normally done by referring
the matter to investigations branch
g

• Reports will issue to IPD in all but the most exceptional of
circumstances



3.5 Years/Periods of Audit
(and transactions for audit)
• Carried forward from 2002 Code

• Auditor should focus on the periods indicated in the audit
letter

• R f
Reference t sections 2 4 and 2 4 1 extension of th scope of
to ti 2.4 d 2.4.1: t i f the f
an audit and the impact on a “qualifying disclosure”

3.6 Auditing Earlier Years/Periods

• Specific indication of when earlier years/periods are likely to
be opened have not changed

• 2002 Code: Cost/benefit analysis and inability to pay were
relevant factors

• 2010 Code: Sound basis for believing that significant defaults
have taken place

• Strong indicators that tax avoidance scheme exists



3.7 Post Audit Years/Periods

• No Change in 2002 Code

• Reasonable to expect that where adjustments are required for
a period and the error has been carried forward to later
periods, these periods would also be adjusted

3.8 Review of Cases Previously Audited

• Revenue’s re-audit program – taxpayers previously audited
may be re-audited

• Often a source of frustration

• Advise client at end of audit that his/her affairs may be re-
re
examined



Chapter 4

Finalisation of a Revenue Audit

4.1 Monetary Settlement

• No material change from 2002 Code

• Importance of monetary settlement to the efficient
management of the tax system

• Vigorous prosecution policy will also be applied in appropriate
cases



4.2 Basis of Audit Settlement

Other initiatives currently being introduced by Revenue:

• A new audit management software system (incorporating software for
aspect queries/profiling interventions)

• A quality assurance programme for audits

• A new statement of compliance strategy

The effect of these measures can be seen in this section

4.2 Basis of Audit Settlement

• Specific monetary limits for internal sign of no longer provided for in Code
(e.g. offer in excess of €100,000 required approval of Board level under
2002 Code)

• Audit settlements are now subject to quality assurance procedures

• Taxpayer may be required to confirm in writing that issues indentified
a paye ay equ ed co t g t at ssues de t ed
during the course of the audit have been rectified

• Revenue’s power to issue a Notice of Opinion in relation to penalties



4.3 Interest

• No mitigation of interest under the code
• Imposition of interest in non-audit cases becoming more
prevalent
• Sometimes delays of several years
• Importance of clear written advice to clients re preliminary
tax responsibilities
• Beware CGT Payment deadlines

4.4 Surcharge

• Roll up of fixed penalties into tax geared penalties

• Above roll-up does not apply to 5% and 10% late filing
surcharges



4.5 Penalties

• Undisclosed sale’s receipts, income, gains
• Undisclosed remuneration or RCT payments
• Understated assets
• Overstated liabilities
• Non compliance with VAT, PAYE, RCT regulations
• Improper claims for expenses, deductions, capital
allowances

Mitigation

Category of tax Tax Co- Co-operation Cooperation
default geared operation and a and an
penalty only prompted unprompted
voluntary voluntary
disclosure disclosure
Deliberate 100% 75% 50% 10%
default/Behaviour
Gross Carelessness? 40% 30% 20% 5%
Carelss behaviour
Insufficient care
20% 15% 10% 3%



4.5 Imposition of Penalties

Where there is no agreement on penalties and where Revenue
Officer forms opinion that taxpayer is liable to penalty
Officer will give notice in writing to the taxpayer setting out:
• The provisions of the acts under which the penalty arises
• The circumstances in which that person is liable to the penalty
• The amount of the penalty to which that person is liable
• Such other details as the Revenue Officer considers necessary

4.5 Notice of Opinion

• Revenue will use standard “notice of opinion”
• Copy will go to agent
• Quantum of tax due must be finalised before notice is issued
• Taxpayer can ask for second opinion
• Taxpayer can, within 30 days, request review
can days
• No changes in statutory appeal procedures
• Notices should issue only with express approval of Principal Officer



Appeal

• If within 30 days there is no agreement

• Revenue Officer can apply to relevant court for a
determination

• Such applications must be approved in writing at Principal
Officer level

• Applications will be dealt with by Revenue solicitor

• Cases cannot be dealt with by Appeal Commissioners

“Relevant Court”

• The relevant court will be by reference to the monetary limits, which
are as follows:
€
District – up to 6,349
Circuit – up to 38,092
High – over
g 38,092
,
• The case will be heard in public. There is no provision for “in camera”
hearings
• The new regime post 24/12/2008



Tax Geared Penalties
QUALIFYING DISCLOSURE
PENALTY TABLE 2 CATEGORY OF DEFAULT
FINANCE (No. 2) ACT 2008

ALL DEFAULTS WHERE THERE IS A ‘QUALIFYING PENALTY TABLE FOR DEFAULTS THAT OCCURRED PROMPTED QUALIFYING DISCLOSURE UNPROMPTED QUALIFYING
DISCLOSURE’ ON OR AFTER 24/12/2008 AND DISCLOSURE AND CO-OPERATION
CO-OPERATION

FIRST QUALIFYING DISCLOSURE IN THESE
Q DELIBERATE BEHAVIOUR
50% 10%
CATEGORIES
CARELESS BEHAVIOUR WITH SIGNIFICANT
CONSEQUENCES 20% 5%

ALL QUALIFYING DISCLOSURES IN THIS CATEGORY CARELESS BEHAVIOUR WITHOUT SIGNIFICANT
CONSEQUENCES 10% 3%

SECOND QUALIFYING DISCLOSURE IN THESE
CATEGORIES DELIBERATE BEHAVIOUR
75% 55%

CONSEQUENCES 30% 20%

THIRD OR SUBSEQUENT QUALIFYING DISCLOSURE IN
THESE CATEGORIES DELIBERATE BEHAVIOUR
100% 100%


NO QUALIFYING DISCLOSURE CATEGORY OF DEFAULT NO CO-OPERATION CO-OPERATION ONLY

ALL DEFAULTS WHERE THERE IS NO ‘QUALIFYING DELIBERATE BEHAVIOUR
100% 75%
DISCLOSURE’

CARELESS BEHAVIOUR WITHOUT SIGNIFICANT

4.6 Categories of Tax Default

BEFORE 24/12/2008 AFTER 24/12/2008

Deliberate default Deliberate behaviour

Gross carelessness Careless behaviour with significant
q
consequences

Insufficient care Careless behaviour without significant
consequences




Deliberate default
• A breach of a tax obligation with indicators consistent with
intent
• Cannot be explained by carelessness


Deliberate behaviour
• Not defined in the legislation
• To be given its normal meaning
• Breach of a tax obligation with indications consistent with
intent
i t t
• Cannot be explained by carelessness




Gross carelessness
• A lack of due care
• Substantially incorrect
• Absence of indicators of intent
• Can be explained by carelessness
• Cannot devolve responsibility to agent
• 15% rule


Careless behaviour with significant consequences
• Lack of due care
• Absence of indicators of intent
• Defined in legislation as “failure to take reasonable care”
• Test of reasonable care
• Cannot devolve responsibility to agent
• 15% test




Insufficient care
• As for gross carelessness but under 15% test


Careless behaviour without significant consequences
• Distinguished by reference to 15% test




Pre and post 24/12/2008 important change in definitions

Pre Fraudulently or negligently
y g g y

Post Deliberate or careless
‘knowingly’ deleted

Fixed Penalties

• Range & Quantum
The range and quantum of fixed penalties have increased
significantly
Most common fixed penalties are now €3,000 & €4,000 per
“event”
• Roll Up
Revenue have confirmed that the practice of rolling fixed
penalties into the tax geared penalty will continue



Penalties in Death Cases

• Applies to all open cases post 24/12/2008
• Where before death liability to penalty agreed
• Penalty payable by estate
• Proceedings subject to time limits

4.7 Timeframe for Concluding Audit

• Three month delay by Revenue
• Revenue will
 Advise of current status of audit
 Estimate likely conclusion date
• Much too vague



4.8 Payment – Discharging Liabilities

• Provision for phased payment arrangements while availing of
qualifying disclosure
• Must provide information to justify consideration for instalment
arrangement

4.9 Inability to Pay

• Heavy onus of proof on taxpayer
• Statement of affairs required
• Most recent accounts
• Formal offer document
• Should b fl
Sh ld be flagged as early as possible audit process
d l ibl dit



Chapter 5
Publication
A settlement will not be published where:
• the specified sum in settlement of the tax, interest and
penalties due does not exceed €30,000
• the penalty determined by the court does not exceed 15% of
the amount of the tax underpaid; or
• there has been a Qualifying Disclosure
However, where a penalty is decided in open court much of the
benefits of non-publication are undoubtedly lost

Chapter 6
Prosecution

• Prosecution not covered by 2010 and 2002 codes
• Decisions made by DPP
• Crucial to get legal advice if in this situation



Revenue Powers

Section 900
• Serves a notice on a tax payer to produce records
and documents which contain information on tax
liability
• Pre condition—Person should be given a
g
reasonable opportunity to deliver prior to service
of notice.
• Failure to comply can result in a penalty of €1,900.



Sec 900 continued

• In addition to ‘Civil’ penalty taxpayer can also
be liable to prosecution under section 1078
• Penalty on conviction here is €5,000.
• Question of double jeopardy?
• Anybody prepared to challenge to High Court
and Possibly Supreme Court?

Section 902
• Notice to third parties requiring the production of
records or information relating to the liability of a
taxpayer.
• Saver for ‘professional advice of a confidential
p
nature’
Section 902A
• Similar to section 902 – application to High Court



Section 902 A Matters Arising.
• Sh ld application t court b ex parte or on
Should li ti to t be t
notice.
• What constitutes a class for the purpose of the
section
• Position as to costs of compliance.
• The ubiquitous Mr Haughey----Supreme court
Haughey Supreme
held that bank account holder was entitled as a
matter of constitutional and natural justice to
notice.

Section 903 – PAYE Powers
• Examine records
• Examine personnel records
• Power to enter dwelling without consent only on foot
of a Warrant
• The inviolability of the dwelling is protected by
constitutional guarantee.
Section 904
• RCT inspection



Section 904

• The whole basis of the Relevant Contracts
Tax may be unconstitutional.
• Tax upon a Tax
• Rate of Tax
• Contrast with PSWT and DWT
• One law for white collars and one for blue.

904 A to 904J

• Various powers dealing with banks, insurance
companies,investment undertakings etc



Section 905
• Allows Inspector to enter any business premises
where a trade is carried on or records are
maintained
An Inspector cannot enter a private dwelling
without consent or without a District Court warrant
• Allows an Inspector to search for, copy or remove
records

• Entering Premises



Section 905(2)

• Authorised officer at “all reasonable times”
• Enter any premises
• “Reason to believe”
• Trade/profession
• Activity chargeable to tax is carried on

When There …

• Require any person to produce any books or other relevant
documents
• Examine books, records, etc and take copies/extracts;
• Remove & retain books/records for a reasonable period for
examination
• Examine any property listed in any balance sheet or other
statements
• Require the taxpayer or employees to give all reasonable
assistance
• Search for what has not been produced



• Concept of reasonableness?

• Who decides?.

• Remember concept of proportionality and
natural and constitutional justice.

Professions – Section 905(2)(c)

• “Nothing … requiring any person carrying on a
profession … to produce … documents relating to a
client, other than
• …
• (ii) As are otherwise material to the tax liability of the
person carrying on the profession or
• …
• And in particular, that person shall not be required to
disclose any information or professional advice of a
confidential nature given to a client.”



Search Warrant

• Reasonable grounds to suspect
• Failed to comply with the Taxes Acts
• Likely serious prejudice to proper assessment
• Records likely to be present
• “For as long as they are reasonably required”
g y y q

Search Warrant

• Can’t enter building used as private residence
• But
• May get search warrant from District Court



Search Warrants – Finance Act 2007

• Revenue offence
• Section 1078 & amnesty
• “is being, has been or is about to be
committed”
• Revenue can be accompanied by Gardaí

Where?

• Section 908C(1)
• “Any building, part of building, vehicle, vessel,
aircraft, hovercraft or any other place
whatsoever”



When There

• Search premises
• Any person on the premises
• Any thing on the premises
• Require persons there to give name, home address,
p
occupation
• Require persons to produce material in their custody
• Require to explain value & relevance of material
• Seize & retain books & records, including … where
records are stored

Failure to Comply?

• €5,000
• or
• 6 MONTHS PRISON SENTENCE



Section 906
• A Garda may accompany an Inspector and arrest an
individual who obstructs the authorised officer
Section 906A
• Serves notice on bank to make available records relating
to the liabilit of an individual
liability indi id al
• A copy of the notice must be given to the taxpayer

Section 907
• Same as S.906a but it involves an application
through the Appeal Commissioners
Section 908
• Application to High Court requiring information
from bankers, etc
• Used for individuals and also in Class actions
• Used extensively in DIRT and other enquiries.



908 D Specifically relevant to
Accountants/Advisors
• Proceed with extreme caution.
• Costs should be awarded(against Revenue)
for court appearances and also for compliance
with any order.
• M t make court application.
Must k t li ti
• May not be possible to claim re imbursement
from client.

Section 909
• Power to request statement of affairs
Section 910
• Power to get details from other government
departments of payments made
Section 911
• Power to impact asset for valuation purposes



Section 886
• Obligation to keep certain records
• Books and documents on income and expenditure
• Linking documents which means documents drawn up
in the making up of accounts and showing calculation
linking the records to the accounts
• Keep for 6 years

Section 889
• 46G
Section 890
• nominees
•Section 891
• Return of interest paid gross
Section 891A
• Return of interest paid to non-residents



VAT inspection powers
• Regulation 9
• Lists in detail the records that must be kept by a VAT
registered person
• Authorises Inspector to seize goods which are due
to be exported



Code of Practice
for Revenue Audit

www.revenue.ie


To serve the community

by fairly and efficiently

collecting taxes and duties and

implementing Customs controls


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