The new Code which will be effective from 1 May 2022 sets out their revised framework for interventions from that date and provides for a new graduated response to taxpayer compliance behaviour and also makes significant changes to many of the rules around voluntary disclosure. The existing Code (2019 version) will have continued applicability to any interventions opened before 1 May 2022.
Revenue’s new compliance framework sets out what they intend to be a consistent and graduated approach allowing for different levels of intervention to enhance their real time engagement with taxpayers.
It remains the case that early discovery of any errors and full cooperation with Revenue’s interventions allow for maximum protection against sanctions. What is changing is the potential reduced response time to Revenue enquiries which were previously not within the scope of formal audits and investigations making it essential for all taxpayers that any Revenue enquiries are treated with extreme caution and acted upon quickly.
Intervention Levels
Under the revised Code there will be 3 intervention levels which reflect Revenue’s intention to provide a graduated response to risk and taxpayer behaviour. The clear message is that taxpayers should carry out regular reviews of their tax affairs and address any issues prior to contact from Revenue.
Level 1
Level 1 interventions are designed to support compliance by reminding taxpayers of their obligations and providing them with the opportunity to correct errors without the need for a more in-depth intervention. These will include, for example profile interviews and bulk issue non-filer reminder letters.
On receipt of a Level 1 intervention letter taxpayers will have the option to make an unprompted disclosure in relation to any issue arising.
Level 2
Level 2 interventions comprising either Risk Review (where a single issue is examined) or full Revenue Audit (dealing with wider scope) will be used by Revenue where they perceive a potential risk in respect of a taxpayer.
Taxpayers have the option to make a prompted qualifying disclosure when notified of a Level 2 intervention but must do so within 28 days of receipt of the notification unless additional time is requested – see below.
Level 3
Level 3 interventions are Revenue Investigations and these are used to tackle serious fraud and evasion. A taxpayer is unable to make a qualifying disclosure once notified of a Level 3 intervention and therefore could potentially face publication and even prosecution.
Risk reviews and prompted qualifying disclosures
The new Code introduces a new type of intervention within Level 2, namely Risk Reviews. These are in many cases what would previously have been termed Aspect Queries with the significant difference that now any disclosure being made will be regarded as a prompted disclosure with resulting higher penalty levels than was previously the case, and of course a 28 day deadline for making the disclosure
Where additional time is required to enable the taxpayer prepare a disclosure, the taxpayer may apply for an additional period of 60 days to prepare the disclosure provided such application is made within 21 days of receiving the notification of the Level 2 intervention. In this regard Risk Reviews and Revenue Audits are similar, however the scope of a full Revenue Audit is likely to be wider.
Notwithstanding that a Risk Review may be confined to a single issue within a tax head, for example a particular area of PAYE taxes a qualifying disclosure must include any underpayment within that period in relation to that particular tax head otherwise the taxpayer could face higher penalties and possible publication on the list of defaulters as the disclosure will not be regarded as qualifying.
Summary of other changes to the Code of Practice
The new Code which covers all taxes and duties with the exception of customs takes effect on 1 May 2022 in relation to Revenue interventions commencing from that date. There are a
number of changes in the Code which may also have applicability to interventions already ongoing
- The threshold for publication has been increased to €50,000 as provided for in the recent Finance Act. The previous threshold of €35,000 related to tax interest and penalties and was therefore easily breached.
- Also as provided for in the Finance act a Taxpayers' ability to make a qualifying disclosure in respect of tax underpayments relating to offshore matters has been reinstated.
What does this mean for me and my business?
Revenue’s revised Framework and Code of Practice will have serious implications for any undetected errors in a taxpayers returns. The opportunities to make an unprompted disclosure in relation to any such issue will be more limited and this will have consequences in relation to the level of penalties and other sanctions being applied by Revenue such as publication.
Regular self- review with a view to voluntary disclosure of any tax underpayments discovered provides the best protection available in the new environment. In particular the fiduciary taxes subject to real time reporting are likely to receive more scrutiny from Revenue and will give rise to prompt Revenue action where discrepancies occur.
Tax Risk Management is key and of course we are available to assist. We have extensive experience in identifying and resolving tax issues and in dealing with Revenue interventions at all levels.
