Tips for dealing with a Revenue audit or investigation

We like to share insights from our 25 years of negotiating difficult audits, saving millions in tax settlements and even avoiding criminal prosecutions.

Here are 5 recommendations that will improve your outcome 90%:-

1. Hire a tax professional to handle all communication with Revenue, including replying to the first letter.
2. Consider a tax expert with no 'skin in the game' and with no interest in displacing your accountant.
3. Have your tax expert reply to the Revenue notification letter within the 14 days notification period.
4. Change the date of the audit, no matter how prepared you think you are.
5. Begin the preparation of a 'voluntary disclosure' at the earliest opportunity.

There are significant benefits to hiring an independent tax consultant for an audit.

The Revenue Commissioners have a strong preference for dealing with experts in audits. It makes their job easier and immediately signals that the case file will be well presented - an important factor when seeking additional time.

The initial contact with Revenue is extremely important. A tax expert is in a better position to provide polite but firm representation in this and subsequent discussions.

Engaging a tax expert frees up your accountant to focus on the labour intensive process of extracting the necessary information and carrying out any further analysis that is required.

Large penalties, publication on the tax defaulters list and prosecution are caused by mistakes at the beginning of a Revenue audit.

You must understand the different stages of a Revenue audit and your responsibilities at each one. No second chances are given by Revenue for oversights as the audit progresses.

Failing to provide deliverables on time will expose you to higher penalties, greater interest charges, publication on the tax defaulters list and prosecution.

No matter how prepared you think you are - your number one objective on receiving a Revenue audit notification should be to change the date.

It's vital that you react to the Revenue notification letter. The legal timeframe for requesting a change of date is 14 days beginning on the date of issue of the audit notification letter.

The biggest mistake you can make is to ignore the notification letter or to 'go it alone' and start informal discussions with the Inspector. These actions provide leverage to Revenue in the audit.

You will be presented with an opportunity to make a 'voluntary disclosure' at the first meeting with Revenue.

The quality of the disclosure made - and assuming it is compiled as requried by law - will determine the scale of penalties applicable to any settlement, the possibility of publication and the risk of prosecution.

A voluntary disclosure must include all significant tax issues and a proposal for payment of taxes and interest identified. It goes without saying that full analysis by us and consideration of the relevant tax issues by you requires time.

Preparation for the audit will include the following:-

1. Consideration of the tax-heads and tax-periods under audit and which of these is legally outside the scope of Revenue's power to examine.
2. A review of all tax filings and transactions with particular focus on certain areas including VAT rates, international trade, property transactions, monies extracted by directors and employees, use of corporate assets, the quality of records, accounting classifications of items in the financial statements.
3. Consideration of large transactions and legal structure in place and previous tax advice taken for reasonableness and technical accuracy.
4. Review of corporate restructurings, cross-border transactions, share disposals, transfers of value and other 'big-ticket' items and potential exposure to anti-avoidance legislation.

Achieving the best outcome in an audit requires swift action on receipt of an audit notification letter, identification of all tax issues in the voluntary disclosure and an understanding of how to present relevant matters to Revenue at the initial meeting.

Usually these steps must be carried out in a very short period of time - often less than 8 to 10 weeks. The average audit time-frame is 9 months with significant engagement with Revenue after the initial meeting.

As Revenue may set-aside any disclosure made upon finding any new issues, it is critical to engage representation at the earliest opportunity.

Professional representation will enable you to navigate an audit, negotiate with Revenue and secure the best financial settlement that can be achieved in the circumstances.