REVENUE powers are increasing constantly, allowing it to target those it believes have tax issues. Taxpayers are selected for audit if the figures in their annual returns are out of line with those of other businesses within the same sector. Revenue also picks specific industries, such as construction, for periodic audits. Taxpayers are also selected for random audits, although this is becoming less common as Revenue’s information-gathering techniques become increasingly sophisticated.
WHO IS MOST AT RISK?
Revenue has expressed an interest in cash businesses such as hairdressers, restaurants, pubs and cafes.
It also conducts streetscape audits, visiting every business on a particular road.
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The finance bill before the Dail introduces reporting requirements for credit-card processors. This may enable Revenue to identify businesses where there is a shortfall between turnover reported for tax purposes and their credit-card receipts.
Landlords are another target, with Revenue conducting door-to-door checks on housing estates where many of the properties are rented. It can cross-check tenants’ claims for tax relief on the rent they pay against their landlords’ tax returns to ensure they are declaring the rent they receive.
Revenue can also search for undeclared rents by checking registrations with the Private Residential Tenancies Board, rent subsidies paid by the Department of Social Protection, and payments made by landlords for the non-principal private residences tax and the new household charge.
WHAT IS THE TAXMAN LOOKING FOR?
Items that will increase the chances of a taxpayer being selected for audit include unusual business expenses and inadequate salaries or drawings from their business. A poor gross profit margin and new capital invested in the business will also raise the prospects of an audit. Make sure your books and records are up to date and correct. File your tax returns on time and make sure that you pay your tax in full and on time. The risk of making late or inaccurate returns can be reduced by asking a tax professional for assistance.
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WHAT IF I GET IT WRONG?
Revenue imposes surcharges of between 5% and 10% for late filing of tax returns, while penalties for non-payment can be up to 100% of the tax due. Penalties will be mitigated by making a voluntary disclosure to Revenue before being caught. In addition to penalties, interest is charged on unpaid tax at 0.0219% a day.
WHAT ABOUT PAYE WORKERS?
Employees with income that is not taxed under PAYE, such as from grinds, nixers and investment income, must report it to Revenue as self-assessed taxpayers. If the sideline income is small, Revenue may see fit to collect the tax due by reducing the individual’s tax credits or the amount of salary taxed at the 20% rate. Otherwise, the tax must be paid in one lump sum at the pay-and-file deadline of October 31 .
TOP TIP If Revenue officials come knocking, it is best to co-operate with them. Many individuals find it helpful to get a tax adviser to help them through the process. While Revenue is seeking to apply the law and detect those who have knowingly done something wrong, it is aware that people are honest and compliant in most cases.
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Working with the Revenue officials on their audit will help ensure that it is done in a timely manner and with the least amount of pain.
Christine Keily is a senior tax adviser with taxback.com