Revenue recently issued an updated Tax and Duty Manual discussing their Co-Operative Compliance Framework (CCF). CCF has been around for a while now and applies to large corporate groups within Revenue’s Large Corporates Division (LCD). For example, in 2021 there were 923 corporate groups managed by LCD of which 443 were eligible to participate in CCF. Of that 443, 125 of them were in CCF. So, unlike most tax stuff, this one’s voluntary. It’s not the tax equivalent of Hotel California because you can check out, and leave, any time you like. Entry and exit can be decided by Revenue or the Group.

CCF is, as Revenue say, “the creation and development of a relationship between the taxpayer and the tax authority or tax administration based on trust and co-operation from both parties in order to achieve the highest level of voluntary tax compliance and certainty”. There are benefits on both sides where a corporate group signs up. From Revenue’s perspective they include, having a better understanding of the business of the Group and ease of access to decision makers within the Group to progress urgent matters as well as gaining business insights to inform discussions on the tax code and its administration.

I was chatting again with Fiona McLafferty, who leads our Tax Controversy practice, on all this stuff. In the past she was a Tax Appeal Commissioner and someone you probably didn’t want to have to meet because it meant you thought you had been overcharged tax and you needed her to make the first call whether you were or not.

Fiona notes that from a taxpayer group perspective, some of the benefits outlined in the manual comprise Revenue having a better understanding of how the business works, recognising the difference between business-driven and tax-driven decisions and thereby minimising possible misunderstandings. In addition, the group will have access to a Dedicated Case Manager to resolve misunderstandings or progress major issues. This provides a communication channel to engage with Revenue to obtain Revenue’s view in relation to specific tax-related matters.

Fiona explains the new Code of Practice for Revenue Compliance Interventions expressly states that any activities conducted through the CCF are classified as a Level 1 compliance intervention. This preserves the right to make an unprompted qualifying disclosure. The level of tax-geared penalties that can apply differs for unprompted and prompted qualifying disclosures with the former being lower. The quantum of penalties will depend on such circumstances as the category of default involved (either careless or deliberate behaviour), the level of co-operation shown throughout and the presence of any prior infractions.

Great stuff but is there a quid pro quo? Firstly, there will be an annual risk review meeting between the Group and the Revenue Case Manager to confirm that the Group is meeting its obligations and commitments under the CCF and to develop relationships. The meeting must be with a minimum of one Group representative and the Group can have its tax adviser tagging along if it wants. The manual says that “In order to allow the taxpayer to adequately prepare for the meeting, Revenue will issue an agreed agenda for the meeting no later than 4 weeks before the meeting date”.

The notification letter should advise that the meeting will be conducted as a Profile Interview (a Level 1 compliance intervention) under the Code of Practice. This preserves the right of the Group to make unprompted qualifying disclosures on foot of any issue which is raised at, or emerges from, the annual risk review meeting. The annual risk review meeting will have a risk-based focus so it’s clear that this ain’t “a tea and bickies” chat although Earl Grey can be served!

The Group will be required to complete annual self-review(s) that focus on the identified risk areas. By the end of the meeting, there should be agreement on what is expected from the Group for each self-review item. The first meeting will differ in format to subsequent meetings as it will involve scene setting and fact finding. The manual says, “Revenue will seek to gain an in-depth understanding of how the business works, the Group structure, the remuneration model (if any) adopted by the Group and the broad principles of the tax control framework in place”. Subsequent meetings will focus more on any updates to these structures and models.

But the “tax control framework” point is an important one. Fiona highlights the importance of this because as the manual says a Group will be required to confirm to Revenue, that it has the broad principles of a tax control framework in place in respect of the following matters:

• Tax Strategy Established: This should be clearly documented and owned by the senior management of the Group.
• Applied Comprehensively: The tax strategy needs to govern the full range of the Group’s activities.
• Responsibility Assigned: The role of the Group’s tax department and its responsibility for the implementation of the tax strategy should be clearly recognised and properly resourced.
• Governance Documented: Rules and reporting that ensure transactions and events are compared with the expected norms and that potential risks of non-compliance are identified and managed. The governance process within the Group should be documented and its effectiveness reviewed periodically.
• Testing Performed: Compliance with the policies and processes of the tax strategy, its application and the governance of the process are regularly monitored, tested and maintained.
• Assurance Provided: The corporate governance, responsibilities, communications strategy and overall risk management strategies are such that they can be outlined to Revenue, as required, to satisfy Revenue that the Group has the principles of a tax control framework in place.

In other words, the Group must set out its tax strategy, stick to it, test it, and show it has stuck to it. Fiona notes that a tax control framework can form part of the system of internal control of a Group in managing tax and tax risk across the Group whether the Group is in CCF or not. Fiona explains that this can’t be underestimated. Appropriate time must be given to this and will form part of the “To CCF or not to CCF” question.

This is in addition to preparing for Revenue’s agenda for the annual risk meeting of which that tax control framework will form part. All of this has to be compared to staying outside the CCF and waiting for Revenue to ring the Group’s doorbell where the benefits of an unprompted qualifying disclosure may not be available. It’s important to note that certain Groups will decide that CCF isn’t for them and to be clear that’s okay; this is voluntary. It’s not a one size fits all solution to engaging with Revenue and the Group has to do what’s right for it.

Please note this article first featured in the Business Post on Sunday, 29 January 2023 and was re-published kindly with their permission on our website.