The Revenue Commissioners carried out more than 11,000 audits last year and almost 500,000 assurance checks. The chances of coming under the scrutiny of the taxman are unlikely to lessen in 2011 but significant changes should benefit businesses and the self-employed who have to undergo the rigours of an audit.

Writing in The Sunday Business Post Andrew Cullen, president of the Irish Taxation Institute, says the key provisions in the new code of practice “reflect the changed economic circumstances and introduce a practical and more considerate approach to genuine tax mistakes and tax bills”.

Many taxpayers, Cullen says, are currently finding it extremely difficult to pay an audit settlement – if they are able to pay at all, that is. The new code recognises this where a taxpayer either needs more time to pay or is genuinely unable to pay. If time is the main issue the taxpayer can seek phased payments – where inability to pay is claimed, the taxpayer must furnish proof of this.

To substantiate such a claim, the taxpayer might have to provide information such as:

  • A signed statement of affairs on the last day of the month prior to the audit notice
  • A copy of the last accounts
  • A list of all assets held and the reason for not disposing of them to pay the liability
  • An explanation why a loan can’t be obtained to pay for the liability
  • Evidence of such a loan refusal
  • Calculation of anticipated income and expenditure

In some cases, there may not be any loss of income to the state as a result of an administrative error. The ‘no loss of revenue’ provisions in the 2002 code have been revamped substantially to deal with such errors. If the taxpayer can prove to the Revenue that a genuine error resulted in no loss of revenue to the exchequer, there will be no tax payable, limited interest and some penalties.

Open-ended audits will occur much less frequently than in the past. Once the taxpayer has dealt with all Revenue queries “within a reasonable timeframe” and three months have passed, Revenue will try to give an estimated completion date.

A new publication detailing the changes, Revenue Audits and Investigations – the Professional Handbook, has just been published by the Irish Taxation Institute.

If you are subject to a Revenue audit and need an independent confidential review of your tax status or need assistance in negotiating a settlement contact Anthony Casey of Noone Casey .

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