Some business owners think that once a tax return is filed with the Revenue Commissioners their worries with tax are over for another year. In most cases that’s true, but if your business has been selected for a revenue audit, it’s critical that you’re prepared for a very thorough search of your accounts that could go back a few years and then some.
The main problem that companies face is they approach an audit with a ‘them against us’ attitude – in most cases any company selected feels hard done by because they feel they are being singled out unfairly. However, the selection policy of the Revenue Commissioners is not so cut and dry – companies might be picked for audit because they operate in a certain industry and because Revenue has planned special projects in that sector in a certain year, for example. In other cases, some businesses only have themselves to blame – consistently filing late tax returns generally acts as a beacon to auditors. Also, irregularities in an annual statement compared to monthly submissions can act as a trigger.
Regardless of the circumstances of why a company is selected for audit, it is critical that they comply. In general, a company will receive 6-8 week’s notice of an audit taking place – the period that will be inspected will also be highlighted in an early correspondence. The onus then falls back to the company to have their house in order ahead of the review. On the day, the auditors will give business owners the opportunity to make a voluntary disclosure, which is a chance to outline any anomalies and declare any outstanding taxation that was overlooked for whatever reason in the past. This must be in the form of a written statement ahead of an audit taking place.
The essential element, however, is transparency and full disclosure – the penalties, if there are any, can be drastic if anything discrepancies are found during the review. This is why it is critical that a company, especially small and medium sized business, have their accounts in order every year. We have covered how to organise and manage your accounts before in this blog but it’s worth highlighting the importance of it again and again. A confusing system can spell disaster for any firm and if a business finds itself in an audit situation, a disorganised accounts system certainly won’t help – in fact, it will most likely make things much worse and penalties more severe as even the smallest details are scrutinised.
We realise that many businesses are of the mind that survival above all else is the priority right now but neglecting to comply with Revenue if selected for audit should always be a concern. By ignoring responsibilities in firstly having a proper accounting system in place and secondly filing returns on time, business owners run the risk of putting their company in the spotlight when it could so easily have been avoided.
DCA Accountants and Business Advisors