Revenue Compliance Interventions

Qualifying Disclosures. Prompted or Unprompted. Revenue Compliance Interventions. Audits and Investigations. New Code of Practice.

The Revenue Commissioners published a new Code of Practice for Revenue Compliance Interventions, which took effect from 1^st May 2022.  From that date onwards, if you receive a Revenue Letter or Notification to examine your tax affairs it will be described as a “Compliance Intervention”, classified under three risk levels: Level 1, Level 2 or Level 3.   The type of qualifying disclosure varies, depending on the risk level.

What is a Qualifying Disclosure?

According to Revenue’s most recent guidance material, “a qualifying disclosure is information you give to Revenue if you:

• have not reported all of your income or gains or
• have made an error on your tax return.

This qualifying disclosure may be unprompted or prompted.”

Under a Level 1 Compliance Intervention, an unprompted qualifying disclosure may be made.  This means a disclosure can be made at any time before a Revenue Audit Notification letter is issued or an investigation commences.  This includes a full disclosure of the tax underpaid, accompanied by full payment of the tax liability along with statutory interest.  Taxpayers can also avail of the self-correction without penalty option, provided tax returns are corrected within the required timeframe. An unprompted qualifying disclosure reduces (i) penalties and (ii) avoids publication on Revenue’s Tax Defaulters List.

Under a Level 2 Compliance Intervention, it is no longer possible to make an Unprompted Qualifying Disclosure from the date of issue of Revenue’s Letter of Notification.  However, a taxpayer can still make a prompted qualifying disclosure in relation to their tax underpayments. This is possible right up until the commencement of the compliance intervention.  The information to be included in a prompted qualifying disclosure is dependent on the category of behaviour giving rise to the tax default.  Taxpayers have 28 days to make a disclosure following notification of a Level 2 intervention.  A taxpayer can request an additional 60 days to prepare the prompted qualifying disclosure.  This Notice of Intention must be made within 21 days from the date of the compliance intervention notification.

A Level 3 Compliance Intervention is the most serious level of intervention and relates to investigations.  The taxpayer cannot make a qualifying disclosure in relation to the matters under investigation once notified of a Level 3 compliance intervention.

How do I make a qualifying disclosure?

According to Revenue’s most recent guidance material, “to make a qualifying disclosure, you must:

• give all relevant information about the issues that have resulted in tax being due

• state the amount of tax and interest due, and the periods for which they are due

• send this to Revenue in writing, sign it, or have it signed on your behalf

• include a declaration that as far as you know all information in the disclosure is correct and complete and

• include a payment for any tax or duty, and interest due for late payment.

To be accepted by Revenue, a disclosure must be accompanied by a payment of the tax or duty, and the interest due. It is possible to arrange for payment in instalments.”

For further information, please click:

https://www.revenue.ie/en/self-assessment-and-self-employment/making-a-disclosure/qualifying-disclosure.aspx

https://www.revenue.ie/en/tax-professionals/documents/code-of-practice-revenue-compliance-interventions.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Revenue Investigations. Rental Income. Airbnb Income. Qualifying Disclosures. Income Tax. Business Tax. Short term Property Rentals. Revenue Notification Letters.

The Irish Revenue is cracking down on anyone who has a listing on the accommodation website Airbnb.  It appears that Revenue is focusing on the tax years 2014, 2015 and 2016 but please be aware, Revenue have the legislative powers to extend the scope of their investigation to include previous years.   If you have a received a Letter of Notification from Revenue and believe you’re at risk of a Revenue Investigation, please get in contact with us.  If you haven’t yet received a Notice of Investigation, there may be still time to prepare a Qualifying Disclosure.

The questions to ask yourself are:

1. Are you letting a property through Airbnb?
2. Have you recently received a Letter from Revenue advising you that your tax affairs are “under investigation”?
3. Do you believe that you may be at risk of a Revenue Investigation?

So, what does that potentially mean for a Tax Payer?

Once the Tax Payer receives a Notice of Investigation the option to make a voluntary disclosure no longer exists.

Previously unreported income from the letting of property via an accommodation website such as Airbnb will be liable to interest and penalties with potential publication of the Tax Payer’s name on the defaulters list.

What should the Tax Payer do?

If you haven’t received a Notice of Investigation, then you should file the relevant Income Tax Returns NOW.  If you have already filed tax returns for 2014, 2015 and 2016, you should make the necessary amendments to those forms as soon as possible.

If you file your Tax Returns immediately you are reducing the risk of being selected for a Revenue Investigation.

What should the Tax Payer include in his/her Return?

Your Rental Profit is liable to Income Tax, PRSI and Universal Social Charge.

The profit is arrived at by reducing your “Rents Receivable” figure by expenses which are wholly and exclusively incurred for the purpose of your business which include:

• Repairs and Maintenance including decorating, laundry and cleaning.

• Airbnb fees/commission

• Insurance

• Legal fees

• Accountancy / Taxation Fees

• Advertising Costs

• Utilities

Non-allowable expenses include:

• Food

• Commuting/Travel

Recent Revenue eBrief

Revenue eBrief No. 59/18 was published on 17^th April 2018 in relation to the Tax treatment of income arising from the provision of short-term accommodation:

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-04/04-01-20.pdf

This comprehensive and detailed guidance material differentiated between frequent hosting and occasional hosting:

Frequent Hosting – Schedule D Case I

If the property is expected to be available for rent on a frequent and/or regular basis as opposed to a once-off or occasional basis then any profits arising from the provision of the accommodation will be liable to Income Tax under Case I Schedule D.

Allowable Case I Expenses:

• Capital allowances – The annual wear & tear allowance of 12½% for plant and machinery used for the purposes of a trade e.g. furniture and fixtures.
• Pre-trading expenses – expenses incurred up to three years prior to the date of commencement of a trade are completely tax deductible where the expenditure would be deductible had it been incurred after the trade commenced. Examples include the cost of painting or wall papering a room or purchasing towels and bed linen in advance of the guest accommodation being put into use for the first time.
• Expenses wholly and exclusively expended carrying on a trade

Occasional Hosting – Schedule D Case IV

If the property is let only on an occasional or infrequent basis then the profits generated will be taxed under Schedule D Case IV.

Allowable Case IV Expenses:

• No Capital Allowances
• No Pre-trading expenses
• Annual costs with a property will not be permitted such as the Television licence, Insurance, etc.

Additional Tax Issues to Watch Out for

VAT @ 9% could arise if your turnover figure is greater than €37,500.  Please be aware that the VAT registration is based on Turnover (i.e. what you received in rental income) and not Profit (i.e. the difference between your rental income and the allowable expenditure).

In the event of a subsequent sale of this property, since it won’t have qualified as your home for the entire period of ownership, you may not be entitled to the full CGT exemption afforded by Principal Private Residence Relief.

What to do Next

If any of this post has affected you and you’re worried about a potential tax liability or Revenue Investigation, please don’t hesitate to contact us to see what we can do for You.

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Qualifying Disclosure. Revenue Compliance Intervention. Audits and Investigations. Compliance Notification Letters

Today, 3^rd March 2017, Revenue issued eBrief 23/17, announcing the publication of its updated Code of Practice for Revenue Audit and other Compliance Interventions – February 2017.  All compliance notification letters will now advise the taxpayer of Revenue’s potential use of e-audit techniques, as part of the intervention process. This updated Code of Practice also incorporates amendments to the qualifying disclosure regime in relation to offshore matters.  These are due to come into effect on 1st  May 2017.

The main changes are as follows:

• Paragraph 2.6 states “The scope of the audit will also be set out, and will range from a single tax-head or single issue for a specific period or year to a comprehensive audit for a number of years.” In this section, Revenue’s Audit/Compliance Notification Letter will now provide more clarity as to what the tax head(s) and year(s) will be audited.

• Paragraph 3.7.1 states “In cases not involving deliberate default, if Revenue draws the attention of the taxpayer to issues not within the initial scope of the Revenue Audit, without formally extending the audit, the taxpayer will have the benefit of an ‘unprompted qualifying disclosure’ in respect of any liabilities disclosed.” Here Revenue is extending the circumstances where a taxpayer can make an unprompted qualifying disclosure. In the previous Code of Practice, if Revenue identified areas not within the scope of the audit, as outlined in the audit notification letter, but considered that they were related to the subject matter of the audit then the Taxpayer could only make a prompted qualifying disclosure.

• Paragraph 3.13 states “A notice of intention to make a qualifying disclosure will not be granted where the taxpayer has already availed of a 60 day period in respect of the same issue or period, i.e. only one 60 day period will be allowed to prepare a qualifying disclosure for the same issue or period.” This amendment was introduced to address the issue of taxpayers’ delays. The Revenue Commissioners want to make it clear that the taxpayer has only one sixty day period in which to prepare a qualifying disclosure for the relevant issue and tax period.

• Paragraph 4.10 states “Revenue Compliance Interventions can involve the copying of records or the extraction from records… The data will be deleted within six months of the date that the compliance intervention is finalised.” This section states that if Revenue copy or extract taxpayers’ information or records, as part of a compliance intervention, that this data will be deleted within a six month period from the conclusion of the intervention.

• Paragraph 6.2 increased the statutory publication threshold amount from €33,000 to €35,000. Please be aware that this figure is the accumulation of tax liabilities, statutory interest and penalties.

As with previous updates to the Code of Practice for Revenue Audit and other Compliance Interventions, if the taxpayer has received a compliance intervention notification, and the intervention has not been settled by 22^nd February 2027, the taxpayer has the option of using the terms of this Code of Practice or the previous one.

For further information, please click: https://www.revenue.ie/en/tax-professionals/documents/code-of-practice-revenue-audit-2017.pdf

What we can do for you

Did you know that it’s the Revenue Commissioners’ aim is to audit every company at least once, every five years?  We have extensive experience and expertise in dealing with all aspects of Revenue Audits, Compliance Interventions and Investigations.  For further information on minimizing and managing your tax risk, preparing qualifying tax disclosures, supporting you throughout the intervention and ensuring the best possible outcome, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Tax Advice for Revenue Audits, Compliance Interventions, Reviews, Investigations under all Tax Heads

Today, 20^th November 2015, the Revenue Commissioners published eBrief 112/15, the updated and new version of the Code of Practice for Revenue Audit and other Compliance Interventions.  It covers types of intervention, audit procedures, tax and duty defaults, tax avoidance, prosecution, etc.

The main changes include the following:

• Paragraph 1.10.5 states that a Revenue officer may, under Section 851A TCA 1997, disclose taxpayer information to a professional body to report a tax agent/practitioner in situations where the Revenue officer is satisfied that the work carried out by the agent/practitioner does not comply with the professional standards of that representative body.

• Paragraph 3.16 details the term “full cooperation.” There is a list of what constitutes “full cooperation” as well as what is deemed to be a lack or failure to cooperate fully with Revenue.  This revised Audit Code focuses on the importance of “full cooperation” in this paragraph as well as in the tables of penalties.

• New chapter 8 outlines tax law, Revenue policy and procedures for regularising tax and duty liabilities that arise due to certain types of tax avoidance. Paragraph 8.6 deals with the concept of a Qualifying Avoidance Disclosure.  This is separate and distinct from the information on disclosure as outlined in Chapter 3.

• Paragraph 5.4.1 of the Code has been revised to reflect the amendment in Finance Act 2014 in relation to the Surcharge for Late Submission of Returns (Income Tax, Corporation Tax and Capital Gains Tax). It states “Section 1084 also provides that the filing, on time, of an incorrect return, either carelessly or deliberately, is deemed to be late filing.”

• Inclusion of Legislation for Tax Avoidance Surcharge in Appendix III. It states that under Section 811D TCA 1997 “Where a ‘tax avoidance surcharge’ is not agreed or an agreed ‘tax avoidance surcharge’ is not paid, a relevant court will make a determination regarding liability to a ‘tax avoidance surcharge’. While the surcharge applied by Section 811D TCA 1997 is not a penalty it is collected as a penalty.”

• In cases where compliance intervention notices have been given but have not been settled before the 20th November 2015, the taxpayer has the option of choosing whether the settlement be made under the terms of the 2015 Code of Practice for Revenue Audit and other Compliance Interventions or the Code of Practice for Revenue Audit and other Compliance Interventions of 14th August 2014.

For further information, please click:https://www.revenue.ie/en/tax-professionals/documents/code-of-practice-revenue-audit-2015.pdf

What can we do for you?

Revenue Compliance Interventions, Audits and Investigations arise mainly due to inaccuracies and inconsistencies in taxpayers’ submissions.  An automated process can also randomly select individuals and businesses in a small number of cases.  They can be costly and may result in publication on the Revenue’s Tax Defaulters list or even prosecution.  We offer a pre-audit review or compliance check as well as full and comprehensive support throughout the entire Audit process.  Our aim is to assist in minimizing the consequences of any tax underpayments and to achieve the best possible outcome.

For further information, please contact us on queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Revenue Tax Audits, Compliance Interventions and Investigations. Code of Practice for Revenue Audit

The Irish Revenue Commissioners introduced a revised Code of Practice for Revenue audits and other compliance interventions, effective from 14^th August 2014.  This updated document replaces the 2010 Code of Practice.  Where a tax compliance intervention notice has issued but a settlement was not been reached before 14th August 2014, you, the taxpayer, have the option to choose whether the settlement is made under the terms of (i) the 2014 Code of Practice for Revenue Audit & other Compliance Interventions or (ii) the 2010 Code of Practice for Revenue Audit.

The following are some of the key changes introduced in Revenue’s new Code of Practice for Revenue Audit and other Compliance Interventions:

• Revenue will now generally focus on a single year or single period where specific risk has been identified. Previously compliance interventions were carried out over multiple years or periods, especially in relation to the National Contractors Project.  Under the new code of practice, the scope of the audit or intervention will be extended in circumstances where material risks have been identified, using a range of data sources covering a number of years or tax periods.

• The Code will apply to more taxes including Local Property Tax.

• Paragraph 3.5 acknowledges that there may be exceptional circumstances where a “no loss of revenue” claim may be considered in relation to non-VAT and RCT cases. The onus of proof, however, rests with the Taxpayer and/or the Tax Agent.

• Paragraph 5 deals with the Surcharge for the late submission of Tax Returns. Clarification has been provided in paragraph 5.4.1 in relation to Income Tax, Corporation Tax, Capital Gains Tax, Capital Acquisitions Tax and Local Property Tax stating “…a late filing surcharge will not be sought where the return was filed on or before the specified return date and a tax-geared penalty was applied to a settlement.”

• Paragraphs 19.1 and 19.1. outline new protocols for e-audits. These include notification procedures, the format of pre-audit meetings for the purposes of reviewing electronic records as well as the data security policy.

• Paragraph 5.8 provides clarification that where there is no clear cause for the delay in finalising the audit or compliance intervention, Revenue cannot delay or withhold taxpayer’s entitlement to credits or refunds of tax.

For further information, please click: https://www.revenue.ie/en/tax-professionals/documents/code-of-practice-revenue-audit-2014.pdf

What we can do for you

We have a wealth of experience in successfully dealing with Revenue audits, compliance interventions and investigations.  We can assist you to effectively prepare for the intervention, interact/liaise with Revenue and discuss/negotiate settlements, on your behalf.

Our professional services include carrying out detailed VAT and Employer/Payroll Tax Reviews to identify areas of non-compliance, exposure, risk, potential improvements and cost savings, etc.

For further details as to how we can help, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.