9 Reasons you might be called for a Revenue Audit

Ever wonder why your business has been selected for an inspection? Every year, the Revenue Commissioners become more and more sophisticated in how they operate and who they target for audits. Although you are unlikely to avoid an inspection forever, it is good to be aware of how you might come under Revenue’s watchful eye sooner rather than later.

1. Continuous late filer

When completing tax returns for you and/or your company there will always be required filing dates with Revenue. These deadlines can usually be extended if filed online. However, if you repeatedly file returns late you will be flagged by Revenues REAP system and this increases the chances of a Revenue audit or inquiry. An obvious way to avoid this is to keep on top of your filings and make sure they are made on time, across every type of tax (VAT/PAYE/Corporations tax/Income tax).

2. Continuous late payer

It’s a common misconception that you can file your return by the filing date and pay the liability later when you have the funds available. Unfortunately, this is not the case and Revenue have the right to charge interest on the late payment. On top of this, not paying on time increases the risk of revenue audit. It should also be noted, in order to avail of online deadlines, you need to file and pay, by the filing date. One without the other will not suffice.

3. Amending returns several times

After a tax return has been filed, there is a facility to amend this return, in light of genuine errors/omission. However, if you are constantly filing returns and subsequently amending, this can raise a query with Revenue.

4. CRO accounts not agreeing to VAT returns

Revenue may inspect the accounts that are filed with the companies’ registration office, to determine if the reported sales figures agrees to VAT returns. If there is a variance they may inquire of same, at which point you or your accountant will need to have a reconciliation for any difference.

There can be a genuine reason for the difference, but not reporting the correct information on the VAT return may cause issues such as penalties and interest from Revenue.

5. Your industry

You may well be unlucky in that, the particular industry you are in is a target. Revenue focus on specific industries at various times as they feel there may be a chance of underpayment of taxes. For example, they recently targeted contractors, such as IT contractors and doctors who had set up limited companies.

6. Claiming the Research and Development tax credit

If your limited company has claimed the research and development tax credit, you will more than likely be selected for an audit at a future date. It should be noted this audit will pertain specifically to the R&D claim rather than other tax aspects of your business.

7. Third party information - Form 46G

Revenue can also collate information on your business from third party sources such as the form 46G. This return is to be filed by traders and details people/company’s they have entered into business with in the year and the value of payments made to each. If the information shows a large variance from your sales figure in your accounts or CT1 it may cause an inquiry from Revenue.

8. Your corporation tax return

If you have a limited company, you will have to file a corporation tax return (CT1) with Revenue each year. The details on this return can give rise to an audit. For example, if Revenue notices that your Gross Margins are outside the norm for your particular industry this can raise a flag with Revenue. Another areas Revenue is interested in are overdrawn director loan account balances.

9. Random selection

Of course, your business can also simply be selected at random for an audit. This has probably become less common in previous years as Revenue use their REAP system to better target potential underpayment of tax.

Conclusion

If selected for an audit you should contact your local TaxAssist Accountant for advice and support, as soon as possible.

Date published 28 Feb 2019

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.