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DCA Q&A – SHOULD I MAKE AN UNPROMTED DISCLOSURE?

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Q: My business struggled in the past with meeting tax obligations, and has been selected for an audit covering 2011 and 2012. Having gone through the accounts for these years, I’m pretty confident that there are no problems. However, I’m concerned about a claim made for the 2010 tax year – new guidance issued by Revenue on allowable expenses and subsistence makes me worry that there would be an issue with it. The amount isn’t huge – I could afford to pay any tax bill arising from it – but I’m now somewhat worried that it could result in a significant fine or more problems. Should I disclose it, and what would the likely attitude be.

 

A: Yes. It might sound glib to say, but paying your taxes is the right thing to do – and, if you leave this to lie, it will be a constant source of stress.

 

There are very few arguments to support not disclosing the matter. If I were to play Devil’s Advocate, I’d say that Revenue are unlikely to look back into your 2010 accounts if 2011 and 2012 prove squeaky clean. But you’d be taking a major chance – and the longer it lies, the worse it will look.

 

If Revenue you make this as an unprompted disclosure, then you may be surprised at how flexible they can be. As you explain it, this appears to be a genuine mistake arising  from your misinterpretation of the law in lieu of Revenue guidance – I can’t speak without knowing all the details, but I would be optimistic about your chances of a settlement to pay any outstanding amount with some interest rather than a fine.

 

If you have been are preparing for this audit and disclosure yourself until now, I’d highly recommend getting professional advice. At DCA, we often go through a client’s books and help clear up issues like this. Don’t hesitate to get in touch if you would like an initial, no-obligation meeting to discuss your options.

 

Declan Dolan

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AVOIDING THE AUDIT

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No company wants to be selected for a Revenue Audit, but how can you keep your firm chugging along without the taxman’s intrusion?

 

Even firms that do everything meticulously by the book find Revenue audits a pain: aside from the risk of uncovering liabilities (with added interest), audits take up a huge chunk of valuable management time. Fortunately, the Revenue Commissioners don’t look to put compliant firms through the wringer. In fact, they adopt certain procedures designed to target companies with a heightened risk of intentional or unintentional non-compliance. If your business can avoid raising Revenue’s red flags, you can minimise your risk of an audit and all the hassle that goes with it.

 

Be Timely

One of the easiest ways to show up on Revenue’s radar is a late filing, or a late payment. Delays in paying and filing present two possible scenarios – a business that is struggling, or a business that isn’t as organised as it should be. Either instance increases the risk, in Revenue’s eyes, that a company is deliberately or accidentally making inaccurate returns. For that reason, it’s important to make sure that any required documents are submitted in a timely manner, and that you pay liabilities when they are due. If, for whatever reason, you are unable to do so, you should make contact with Revenue to explain the situation rather than having them chase you – if you can’t be on time, be pro-active at least.

 

File Correct Paperwork

Similarly, a company making mistakes in its paperwork raises certain red flags: a businessperson who submits the wrong form is more likely, in Revenue’s eyes, to misreport their income or fail to keep correct records. So, when you are making any filing to Revenue or the CRO, check the paperwork exhaustively. And, when you’re sick of the sight of a document, check it again.

 

Keep Overheads Proportionate

Revenue know all the tricks there are to reduce liabilities: claiming 100% business use for a vehicle, inflated home-office costs, and claiming personal leisure as a business expense. Unfortunately, because some people abuse the system to write off their personal expenses and reduce their tax bill, it puts the onus on honest businesspeople to prove that their listed business expenses are legitimate.

If your overheads are significantly larger than the average for your industry, you are running a heightened risk of an audit. Unfortunately, Revenue don’t have a way of discriminating between honest businessperson working with high costs and someone abusing the system without taking a look at the books. If you can’t do anything to control your overhead costs, make an extra effort to ensure that every expense is documented properly.

 

Even if you follow all these steps, your business can still be selected for an audit. However, having all your paperwork in order and keeping records will make the process far simpler, and also make officials look on any honest errors that the process uncovers more sympathetically. At DCA, we advise many companies seeking to prepare for a Revenue audit or, better yet, to avoid one by having all their paperwork in order. To see how we can help, just contact us for an initial, no-obligation meeting.