Revenue Compliance interventions – How to manage
Revenue Audits and Compliance Interventions are a necessary part of any self-assessed tax system.
In 2017, Revenue yielded €491.9m from Audit and Compliance Interventions. This was made up of €196.31m from audits and €295.6m from non-audit interventions. While the number of audits carried out in 2017 was down by approx. 15% on the previous year, the number of interventions carried out was up by approx. 21%, with a total of 650,337 interventions carried out in the year.
Compliance Interventions in general have a quicker turnaround for Revenue and require less resources than an audit. These interventions also allow Revenue to engage with more taxpayers in a particular year, but furthermore this form of intervention continues to generate a yield for Revenue.
Taxpayers are therefore far more likely to have some sort of interaction with Revenue in the future by way of a compliance intervention than a full audit. But remember, this often seemingly straightforward enquiry can easily escalate to a full Revenue Audit if not dealt with properly.
If you are selected for a Compliance Intervention, the first thing you should remember is that you have been selected for a reason. Revenue have made greater use of the extensive range of data sources available to them for risk assessment purposes. Data analytics plays a huge part in the selection process and ultimately taxpayers are selected based on the presence of risk indicators, i.e. Revenues systems can analyse vast amounts of data and use this to detect anomalies using predictive models to identify cases which pose a risk. This could be something as simple as a VAT return that appears at odds with the norm, i.e. claiming a VAT refund when you are normally in a payable position.
The type of Compliance Intervention undertaken by Revenue is determined by the risks identified. Non-audit interventions can include assurance checks, aspect queries and profile interviews.
• Assurance Checks
o Aim to clear up some discrepancy in the data held by Revenue.
o Revenue will generally give the taxpayer 30 days’ notice to produce documents, accounts or other particulars as required.
• Aspect Queries
o Short, targeted intervention with the purpose of checking a particular risk which has been identified by Revenues electronic risk analysis system (REAP).
o The taxpayer will generally be told why the query is being made.
• Profile Interviews
o This form of intervention is broader than an Aspect query.
o Taxpayers will be notified of the risk areas which are to be discussed at the profile interview.
o On completion of the interview, Revenue will make a decision as to whether or not a Revenue Audit is warranted.
As a taxpayer, what should you do if you are faced with a non-audit Compliance Intervention?
1. Be cautious, allocate the time and resources needed to deal with this.
2. Remember that you have been selected for a reason and that Revenue are looking to clarify something which has been identified by their system as posing a compliance risk.
3. Carry out a self-review of all data and backup information which has been requested by Revenue. Use the time allowed by Revenue wisely.
4. If the self-review carried out does not identify any errors, or issues that may have caused an underpayment of tax and you are satisfied that everything is in order, then submit the data requested by Revenue. Thereafter ensure that responses to any follow-on queries raised by Revenue are answered in full and in timely manner. Non-descript answers and delays in submitting information can lead to more queries, or worse, Revenue could escalate the Compliance Intervention into a full Revenue Audit.
5. If however, the self-review carried out has uncovered a material error that has resulted in an underpayment of tax then it is advisable to make an unprompted qualifying disclosure to Revenue. These Compliance Interventions are not audits and therefore do not restrict a tax payer from making an ‘unprompted qualifying disclosure’.
• To do so, you must notify Revenue in writing of your intention to make an unprompted qualifying disclosure and request an additional 60 days in which to prepare this disclosure.
• A ‘qualifying disclosure’ is a disclosure of complete information in relation to all matters giving rise to a liability to tax, not just that which has been identified by Revenue.
• The qualifying disclosure must be made in writing, is signed by or on behalf of the taxpayer and is accompanied by:
o a) A declaration, to the best of that person’s knowledge, information and belief, that all matters contained in the disclosure are correct and complete
o b) A payment of the tax or duty and interest on late payment of that tax or duty.
• An unprompted qualifying disclosure has its benefits, namely:
o Mitigated penalties and
If you have any queries or would like our assistance with regards to the above or any Indirect Tax related matter please contact Eithne Lunn or your usual VAT contact.