Date
17 May 2024Category
Remember the feeling of being called on in school to show your maths homework? You'd got the right answer, but there was always a twinge of anxiety that it might not work out in front of the teacher. Engaging with Revenue can feel the same – despite filing returns on time and seeking tax advice, a query on tax can often raise concerns.
However, unlike the random selection of a student in class, Revenue’s scrutiny is often data driven.
Revenue has recently published its 2023 annual report[1]. The report provides insights into the activities of Revenue over the past year and may provide some guidance as to what to expect in 2024.
Increase in Revenue interventions
One thing that is very clear from the annual report is that the slow-down in activity that happened during 2020 and lasted into 2022, in acknowledgement of the difficulties of Covid, is long behind us.
Revenue completed 291,756 interventions in 2023, which resulted in €787m of additional yield. 20% of that yield came from Revenue audits, of which they completed 855 during the period.
Our experience has been that those audits have been across multiple tax heads (payroll/income taxes, VAT and corporation tax), often resulting in additional tax payments, interest and penalties.
This high yield from interventions is partly because of Revenue’s more focused approach to selecting taxpayers for interventions. The sectors that they highlight in their report as being industries of focus are construction, retailers, wholesalers, online platforms and social media, fast food and hospitality.
This approach is underpinned by the increased use of data analytics in taxpayer risk assessments. The Risk Evaluation Analysis and Profiling (REAP) tool for tax and Customs Risk Intervention Selection Programme leverage the data and technology available to assist in focusing Revenue’s resources.
Importance of Compliance and Early Disclosure
While 20% of the additional tax take has arisen from Revenue audits, that leaves 80% from non-audit interventions. This is largely from voluntary disclosures and self-assessments by taxpayers following enquiries from Revenue.
Our experience shows that proactive communication with Revenue during interventions can lead to more favourable outcomes, such as reduced penalties. Penalties can range from 3% to 100% of the underpaid tax, depending on a number of factors, including whether the taxpayer has been cooperative.
As important for businesses, to minimise disruption, is that early disclosures can prevent the need for an enquiry to escalate into an audit. The best outcomes have always come when the taxpayer has volunteered information early and sought to comply with tax obligations as soon as they have realised that there may have been something missed.
We have also seen cases where Revenue’s information is incomplete and by providing further information we have experience of assessments and penalties being removed entirely.
Looking Ahead to 2024 and Beyond
Given Revenue's effective use of data, we anticipate increased activity in 2024. It is crucial for companies to stay on top of tax obligations and rectify any lapses promptly, as Revenue’s data-driven approach ensures they will notice discrepancies.
Revenue is expected to maintain its focus on high-yield sectors and may expand to new areas. With the introduction of PAYE Modernisation and now Enhanced Reporting Requirements (ERR) for payroll taxes, this will give Revenue unprecedented access to payroll data, likely resulting in increased scrutiny and interventions once initial issues are resolved.
Additionally, the Domino’s Pizza[2] case victory, which upheld Revenue’s stance on the employed vs. self-employed distinction, suggests further investigations in this area.
Revenue will likely be just as busy or busier in 2024.
Key takeaways
We're here to help
Revenue has done its homework; let us help you with yours. If you have questions about your tax affairs (past, present or future) or need advice on compliance, please don’t hesitate to contact us.
[1] https://www.revenue.ie/en/corporate/press-office/annual-report/2023/ar-2023.pdf
[2] The Revenue Commissioners v Karshans (Midlands) Ltd. t/a Domino’s Pizza 2023
