Understandably enough, the Revenue Commissioners have in recent years been stepping up the Revenue Audit Programme in a bid to ensure every business is paying its fair share in tax. For most businesses, this shouldn’t be a problem – modern accounting methods and computer records make it far easier than before to undergo the audit process when everything is above board.
The culture of under-the-table payments and creative book-keeping is sadly not dead yet. However, a renewed audit approach from Revenue – and modern methods of detecting non-compliance – may yet kill that off.
For starters, Revenue has been keen to embrace the use of computer or e-auditing techniques. This includes the use of a sophisticated data interrogation programme, IDEA, during the audit process. The programme allows Revenue auditors to rigorously interrogate accounting records, gleaning information that traditional auditing simply wouldn’t.
For example, IDEA can alert Revenue auditors where sales are deleted from accounting records, where incorrect VAT rates are applied, and where payments are made to employees without proper deduction of tax. In other words, when Revenue has determined that it will carry out a computer audit of a business, it is effectively impossible for non-compliant businesses to ‘cover their tracks’.
It’s worth noting that, before conducting a computer audit, Revenue often seeks to have a pre-audit meeting so that the auditors can familiarise themselves with a company’s IT system. This meeting is not part of the formal Revenue audit process – therefore, a company still has an opportunity to make a prompted qualifying disclosure before the audit officially begins.
Revenue has also been keen for companies to effectively audit themselves and disclose their findings: rather than carrying out an audit, for example, Revenue has requested that certain firms ‘self review’ their compliance procedures. Companies that do this must report their findings to Revenue, and detail the scope of the review. Based on this, Revenue will decide whether or not to carry out a full-scale audit.
Even though this process is an onerous one, there is a key benefit to ‘self review’: any underpayment or incident of non-compliance that a company discovers can be regularised by making an unprompted qualifying disclosure, which is far better than having an irregularity come to light through an audit.
Anyone in business should be aware that, when a Revenue audit uncovers non-compliance, it can be expensive and deeply damaging for a business. For example, companies will have to pay any underpaid tax, interest at an annual rate of 10%, and potential penalties of up to 100% on the underpaid tax. What’s more, Revenue’s annual tax defaulters list could make for uncomfortable reading.
The vast majority of businesses do not seek to hoodwink Revenue. Many perfectly honest businesspeople have found themselves on the wrong side of a Revenue audit simply by having slack bookkeeping practices.
There is no reason why you should be oneof those businesspeople, as it is perfectly possible to make sure that your books are in order. Aside from having a qualified book-keeper involved on a regular basis, we also recommend that every company undergoes a regular ‘health check’ to ensure compliance and proper record keeping. That way, businesspeople don’t need to open correspondence from Revenue with dread, or nurse a deadly fear of audits.
DCA Accountants and Business Advisors provides a range of services to ensure our clients green revenue audits with confidence, from day-to-day bookkeeping and regular checks to pre-audit preparations. If you’re concerned about this aspect of your business – or just want some peace of mind – don’t hesitate to contact us.