Top Ten Tips for SEMs When Dealing with Revenue
Article by Patrick Sutton, Partner, O’KellySutton, The Sunday Business Post, 2nd Sept, 2012.
Taxpayer’s compliance record:
A compliant taxpayer is significantly less likely to be selected for Revenue audit. Revenue can also assist in obtaining a phased payment plan in the future, should you ever find yourself unable to pay your tax liabilities on time.
As we all know, it is a legal requirement that tax returns are accurate. The penalties for false returns are severe and can include prison sentences in some cases. If you fine a return already submitted is not correct, we advise that a corrected return or supplementary return be submitted. Continually correcting returns can attract the Revenue’s attention.
It is imperative that tax payers file their tax returns on time. Late returns attract interest at a rate of 0.0219 per cent per day (10 per cent Per annum). A penalty of up to 10 per cent of the tax due may also apply, depending on how late the return is. A history of late returns is one of the triggers for Revenue audits.
Revenue expects business to organise their financial affairs to ensure that they pay their tax debts by the due date. In revenue’s own words, they “cannot and will not become a banker of last resort”.
When it comes to Vat, in particular, Revenue is adopting a zero tolerance approach to non payment. It regards the taxpayer as a Vat remitter who is only collecting the Vat on behalf of Revenue. If your business is going to experience temporary cashflow problems, do not use taxes as a way of funding the business. Instead arrange to meet your bank or external financiers.
In the event of problems arising in your business that may affect your ability to pay tax debts, we strongly recommend early engagement with Revenue. Our experience over the last 20 years is that Revenue, in the main, is reasonable, fair and understanding. Revenue does not take draconian measures at an early stage of problem accounts. But, like the banks, it doesn’t like surprises or someone trying to be too clever.
Dealing with Revenue correspondence:
Failure to respond to Revenue correspondence, such as demand notices for tax due, will be considerable a serious escalation of non-payment risk from Revenue’s point of view. Be aware that final seven-day demand notices from the Revenue for tax due, correspondence from the Sherriff and correspondence from the Revenue solicitor are not copied to the tax agent (company accountant), so these must be communicated to the tax agent urgently.
Know your options:
You need to know what is available to you if things go wrong and you find yourself behind. Revenue is willing to enter into instalment arrangements and has issued guidelines in this area.
Revenue will look to: compliance records, viable business and a commitment to meet all future tax payment obligations when they fall due. The extent of the leeway Revenue will be prepared to give a taxpayer will be “significantly influenced by the level and timeliness of meaningful engagement by the business in the instances’’, according to the guidelines.
We suggest that companies occasionally have ‘dummy revenue audits’ carried out by their advisers, separate from the annual audit – if not every year, every second year. This is useful in educating the taxpayer as to what’s involved in an actual audit and how it should be handled. It flags areas that may be in breach of legislation or ‘at-risk areas’ that may need to be re-looked at.
Revenue audits are rarely random, being less that 5 per cent of all cases. They are generally based on informed selection from knowledge banks or computer-based profiling on Revenue’s REAP (Risk Evaluation, Analysis and profiling) software, including the targeting of particular business sectors and locations.
Revenue is very good at sending out updates in changes to legislation. Someone in the company should be in charge with keeping up to date with changes. You can sign up for tax briefings and e-briefings through the Revenue website, which are the main channel through which Revenue update taxpayers on an ongoing basis. Ignorance is no defence when it comes to breaches of tax law.
If you are unsure of how to deal with certain matters – for example, whether you charge 23 per cent or 13.5 per cent on a sale – you can always write to Revenue for a ruling, outlining what you need clarification on. They will respond and then you always have that Revenue opinion to fall back on at a later stage.
Patrick Sutton, OkellySutton, Accountants & Consultants, Kildare, Co. Kildare. www.okellysutton .com