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Tax Tips July 2017

Revenue Audits

Revenue can select your business for a Revenue audit at any time.  These audits can focus individually on VAT, PAYE/PRSI, Income Tax or Corporation Tax or all four taxes together.

By adhering to the following matters you will reduce the risk of a Revenue audit:

  1. Have your annual accounts and tax return prepared and submitted to Revenue on time.
  2. Submit your VAT and PAYE/PRSI returns on time.
  3. Pay your taxes (Income Tax, PAYE/PRSI, VAT and Corporation Tax) on time.
  4. Only claim as a business expense those expenses that are wholly, exclusively and necessarily incurred for the purpose of the business.
  5. If you are a cash business make sure that you keep proper cash records that clearly show how much cash was received each day and where it went.
  6. If there is a reduction in your turnover or profit margin make sure you provide an adequate explanation to your accountant.
  7. If there is a marked reduction or increase in your salary or personal drawings make sure you provide an adequate explanation to your accountant.
  8. If you are having difficulty paying your taxes contact the Revenue sooner rather than later in order to work out an agreeable plan to pay the arrears.

 

The following points are worth considering if you have been selected for a Revenue Audit:

  • Consider if a comprehensive review needs to be carried out or if any particular transactions needs to be examined in more detail.
  • It may be advisable to seek additional time before the audit commences (in the event that you believe it will take time to prepare the relevant calculations or carry out a thorough review).
  • Ensure any disclosure meets the requirements as outlined by Revenue.
  • Be sure to know the appropriate level of penalty relating to any tax underpayments and in particular consider if there is scope to argue that a penalty should not be applied.
  • While preparing for the audit, you may discover errors which resulted in tax being overpaid.  Consider whether it is appropriate to include these amounts in the disclosure or whether they should be addressed during or after the audit has been concluded.
  • Consider if any issue impacts on more than one tax head.  For example, if it is discovered that VAT was incorrectly reclaimed on entertainment expenses, it should be established if the corporation tax treatments for that expenditure was also incorrect.
  • If additional VAT or PAYE is due to Revenue, consider if it is possible that the corporation tax or income tax due for the period in question may be overstated (which would reduce the net payment due to Revenue).