Revenue Audits




Returns processed in a “non-judgemental” manner
Revenue Audit of selected returns.
Objective is to promote voluntary tax compliance.
Audit normally concerned with review for one year
only.
 Previous years may be opened up if significant issues
are raised during the audit. Will not normally be
exercised.
 Inspector must only use re-opening of old years with
the intention of including them in the final settlement
and not to force agreement of a settlement figure for
the year which is the subject of the review.
Types of Revenue Audit

Field Audit


A comprehensive audit involving a review of all tax heads
i.e. VAT and PAYE as well as Income Tax, usually over an
entire accounting period.
Desk Audit



Also known as a verification audit
Verification audit concerned with verifying particular items
e.g. review of capital allowances computation.
It is possible that as a result of a verification audit, the
investigation could evolve into a comprehensive audit
involving all tax heads.
Selection of cases for audit
 Random selection (makes up around 6% of all audits)
 Mainly based on unusual features in accounts
 Adequate explanations of unusual features should be
submitted with the return.
 Non-compliant taxpayers i.e. persons who file returns
and pay liabilities late, are more likely to be selected for
audit than complying taxpayers.
 Audit can also arise from informant’s letters, information
from third party returns.
 Revenue will not normally disclose the reasons for
selecting a case for audit.
Notification of Revenue Audit
 14 days notice given in a majority of cases.
 In very exceptional cases, shorter or no notice is given.
 The date, time and place of the audit, the Inspectors
right to view or remove records, the taxpayer’s right to
appeal and right to have his/her agent present is
covered in the audit notification letter.
Preparing for Revenue Audit
 Agent should discuss audit with client and cover the following
points: Identify main problem areas and arguments supporting figures in
tax return.
 Deciding whether a qualifying disclosure is appropriate.
 Identification of likely questions and preparing answers.
 Deciding who will answer questions, who can provide information
and documents and ensuring unauthorised personnel do not
answer questions.
 Provision of suitable accommodation for Inspector, ensuring it
causes minimum disruption to the business and ensuring the
Inspector is not accommodated in the Accounts Department if
possible.
Opening meeting with Revenue Auditor
 Attended by Inspector, taxpayer and agent
(recommended but not obligatory)
 Inspector will draw Charter of Rights to taxpayer’s
attention and outline his/her authority to inspect
records and documents.
 Inspector will also address Revenue practice of charging
interest and penalties and the effect a disclosure would
have on the penalties and publication.
 It is imperative that the agent is familiar with legislation
on Revenue Audits, Revenue powers, taxpayer’s rights
and Revenue practice on mitigation of penalties,
otherwise client relationship could be damaged.
Opening meeting with Revenue Auditor
(cont’d)
 Inspector will point out that if irregularities are found
in the audit, he/she will seek a final meeting with the
taxpayer to outline the issues arising, the possible
undercharge of tax and seek to agree a settlement with
the taxpayer.
 Inspector will seek to get a general idea of how
business is run i.e. product range, stock levels, opening
hours etc.
 Inspector may also seek to get a general idea of the
taxpayer’s personal obligations to ascertain whether
drawings/salary disclosed in Accounts is sufficient.
While the Revenue Audit is in progress
 Agent need not remain on premises but should be reasonably




available to deal with queries or requests for information from the
Inspector.
Inspector will carry out a detailed examination of books and
records.
In the case of a desk audit, Inspector will request records and retain
them for examination. Period of retention can only begin once the
Inspector has received all the books and records requested.
Inspector may adopt a “business economics approach”
Accountant should be familiar with profit ratios for various
industries and be fully informed of the reasons why they may/may
not apply to the client.
Closing meeting with Revenue
Auditor
 Inspector will request further meeting at which time he/she will: Present the findings of the audit.
 Inform taxpayer and agent that the audit has been satisfactory and no further
action is proposed or that certain aspects of the audit were unsatisfactory and
request a response.
 If tax is understated, the Inspector will work toward agreeing a settlement.
 Taxpayer will be notified in writing whether the offer has been accepted.
 If publication arises (due to settlement amount prescribed limits) the
taxpayer and agent will be advised in writing.
 Publication will not take place where: Penalties in the settlement figure is less than 15% of tax underpaid.
 A qualifying disclosure was made prior to the investigation or inquiry.
Review Procedures
 Taxpayer may request a second opinion on the
conduct of the audit in relation to various aspects
of the audit.
 Request should be submitted in writing to the
Internal Review Unit in the Office of the Chief
Inspector of Taxes.
 Request should state the reasons why a review is
requested and should state whether they wish for
the review to be internal or external.
 Right to a review is separate from right to appeal
through the courts.