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This article was first published in the July/August 2019 Ireland edition of Accounting and Business magazine.

It is a fundamental principle of Ireland’s self-assessment tax system that returns filed by compliant taxpayers are accepted as the basis for the calculation of tax liabilities. The Revenue upholds compliance by pursuing those who do not file returns and making enquiries, auditing or investigating selected tax filings.

Taxpayers may be selected for a Revenue intervention based on any of the following criteria:

  • the presence of risk indicators signalled by Revenue’s electronic risk analysis system
  • real-time risk analytics, utilising predictive models
  • examination of cases from specific economic sectors
  • random and re-audit programmes.

The primary objective of a Revenue intervention is to promote voluntary compliance with obligations to pay tax and customs duty. Revenue auditors hold significant powers to make enquiries, investigate and take such actions they deem necessary to verify the accuracy of any return provided by a taxpayer.

Revenue auditors are mainly concerned with detecting non-compliance, and their interventions fall into the following categories:

  • Revenue non-audit compliance
  • Revenue audit
  • Revenue investigation.

Non-audit compliance

Non-audit compliance interventions are conducted by phone, secure email, letter or visit and a written notification is not always issued. They fall into three intervention types:

  • assurance checks
  • aspect queries
  • profile interviews.

Assurance checks: these may involve examination of and challenges to a tax return. They are generally based on a discrepancy in data held by Revenue on a taxpayer’s record and focus on a specific identified risk or period.

Aspect queries: these are short, targeted interventions to check a particular risk. The query may include a request for documentation and act as a precursor to a Revenue audit. The taxpayer generally has 30 days to produce documents, accounts or other information requested in response to an aspect query.

Profile interviews: these are scheduled when the risk identified warrants greater scrutiny. Revenue will generally send a letter to the taxpayer outlining the areas of risk that will be discussed during the interview. Revenue may request and examine documentation and records to clarify the risk.

At the start of the profile interview, Revenue will offer the taxpayer an opportunity to make an unprompted disclosure. On completion of the profile interview, a decision will be taken by Revenue as to whether any further action is warranted. The taxpayer will generally be informed of the outcome within two weeks.

Practitioners should be aware that non-audit compliance interventions as outlined above do not restrict a taxpayer’s right to make an ‘unprompted qualifying disclosure’, including on matters specifically addressed as part of the intervention.

Revenue audit

A Revenue audit is an examination of the books, records and overall compliance history of a taxpayer. It may look at a number of risks or focus on a single issue or tax-head, and may involve the use of e-auditing techniques.

The taxpayer and their agent are generally given at least 21 days’ notice of a Revenue audit. The letter issued will include the wording ‘notification of a Revenue audit’ and show the date the audit will begin.

Once the audit notification letter has been issued, the opportunity to make an ‘unprompted qualifying disclosure’ about the tax-heads and periods under audit is no longer available. However, the auditor should give the taxpayer the opportunity to make a ‘prompted qualifying disclosure’ before beginning their examination of books and records.

Where Revenue initiates a desk audit (ie, conducts it by correspondence rather than physical visit), the examination of the taxpayer’s books and records will be regarded as having started on the day after the period of notice has expired.

Revenue investigation

A Revenue investigation is undertaken where Revenue believes that serious tax or duty evasion may have occurred or a Revenue offence may have been committed. The investigation may lead to a criminal prosecution.

A Revenue investigation may begin with an unannounced visit to the business premises. In such cases a ‘notification of a Revenue investigation’ will be handed to the taxpayer at the time of the visit.

In all Revenue investigation cases the letter issued to the taxpayer and their agent will include the wording ‘notification of a Revenue investigation’. The letter will outline the specific period in question, the matters initially being investigated, and the action required from the taxpayer.

The specified period outlined in the notice of investigation will not preclude Revenue from extending the period of the investigation should further information emerge.

A taxpayer who receives a notification of investigation letter may make a disclosure but will no longer be able to benefit from the following:

  • the opportunity to make a qualifying disclosure about the matter under investigation
  • the avoidance of publication, where the final settlement meets the publication criteria
  • assurance from Revenue that the case will not be investigated with a view to referral for criminal prosecution.

Every year Revenue conducts a programme of compliance interventions that aim to minimise the burden on the compliant taxpayer and tackle non-compliant taxpayers. The Revenue is making greater use of sophisticated IT systems to identify areas of risk throughout the tax base.

Accountants should be aware of the various intervention methods that are open to Revenue, and the implications for the ability of a client to make a disclosure that may mitigate that client’s exposure to further tax liabilities, interest and penalties.

John Wilson FCCA is a tax consultant with Doyle Keaney Tax Advisors and a former Revenue auditor.