Often taxpayers who are subject to a Revenue Compliance Intervention or a Revenue Audit are unaware of any inaccuracies in their tax records. This unawareness can be costly; interest and penalties on tax underpayments can often be equal to the amount of tax originally due or even greater in certain cases.
Revenue Compliance Interventions and Revenue Audits are a basic feature of the self-assessment tax system. Revenue’s framework consists of three levels of Compliance Intervention.
- Level 1 is intended to help taxpayers voluntarily fulfil their tax obligations.
- Level 2 may be either a Risk Review or a Revenue Audit. A Risk Review is generally a review of a single tax issue; a Revenue Audit is a check on taxpayers’ tax returns compared to their tax records.
- Level 3 is a Revenue Investigation.
In recent years, Revenue have invested significantly in data analytics and technology. Revenue’s adoption of sophisticated data analytical tools means that any inaccuracies or inconsistencies in taxpayers’ returns are likely to become known during a Revenue Audit. With real time reporting to Revenue, such as the Employer PAYE system, Revenue have access to data which they can review in real time, leading to the possibility of current year audits.
A Revenue Audit can be costly in terms of time, energy and resources as well as financially. Taxpayers should consider pre-audit reviews or health checks to minimise these costs. The outcome of a Revenue Audit may also include publication on Revenue’s quarterly Tax Defaulter list and for more serious tax offences, prosecution.
