Why:

It is a fundamental principle of self assessment tax systems that Returns filed by compliant taxpayers are accepted as the basis for computing tax liabilities. However, Revenue promotes compliance with the Tax System by vigorous pursuit of those who do not file Returns, by auditing selected Returns.

Revenue Audits can be a burden to people and may cause disruption to their business, but they are a necessary and fundamental part of the Tax System.

What Taxes are covered:

The main taxes covered are:-

Income Tax

Corporation Tax

Capital Gains Tax

Vat

Capital Acquisitions Tax

Stamp Duty

PAYE/PRSI

Types of Revenue Audit:

  • Desk Audit : The Inspector will request that certain books and records be left at the Tax Office for inspection.
  • Visit to Business : The Inspector will call to your place of business and after an initial interview will examine the books and records.  This Audit may be confined to one Tax Head eg. Vat or may extend to cover all relevant taxes.

Notification of a Revenue Audit:

21 Days Notice of a Revenue Audit is generally given to both the Taxpayer and his/her Agent.

The scope of the audit will be set out.

Taxpayer Disclosure:

The Taxpayer can make a “prompted Qualifying Disclosure” before the examination of the books and records begins.  This disclosure must be made in writing and is accompanied by a Declaration that all matters contained in the disclosure are correct and complete.

A payment of the tax due, together with interest on late payment of that tax, must also be included.

The advantage of a Qualifying Disclosure that the Taxpayer avoids Publication of the Tax Settlement and also the amount of penalties due will be reduced.

How is the case selected:

There are several reasons why a Tax Return may be selected for a Revenue Audit:

  • Informed selection from the risk profiling of cases using Computer assisted profiling as well as local knowledge.
  • Emphasis of a particular Sector or Scheme where the margins etc may not conform to Industry norms.
  • Random Audit programme.

REAP:

This is the Revenue evaluation and analysis programme and it analyses information entered on your Income Tax Return.

  • It compares same with comparable businesses for margins etc.
  • It compares your Return with information already in the system concerning you.

Location of Audit:

Unless otherwise justified, the audit is carried out at the taxpayers place of business.

An Audit may only be conducted at the Residence of a taxpayer (where he has no trading Premises) with the consent of the taxpayer.  Otherwise the books and records are collected and the Audit is carried out at the Revenue Office.

Audits are not normally carried out at an Agent’s Office.

What happens:

On arrival at the place of Audit the Inspector will show his/her identification and authorisation and explain the purpose of the Audit.

The Taxpayer is offered the opportunity to make a prompted Qualifying Disclosure.

After the initial Interview examination of the books and records will begin.

Initially the Audit will concentrate on the years etc indicated in the Audit Notice.  However, issues may arise that may require the Auditor to consider opening earlier or later years.

In the event of an underpayment the Auditor will calculate interest on late payment and the appropriate penalty.  The Taxpayer will be required to forward a written Settlement Offer to the Inspector.

Summary:

Revenue Audits are an important part of the Tax System.

To receive notice of an Audit can be a stressful time for the Taxpayer.  However, if you maintain proper books and records and file your various Returns on time and make payment when due then the Audit should be completed quickly.