WHAT IS A REVENUE TAX AUDIT?
A revenue audit is a process in which an examination is undertaken of the figures reported on a company’s tax returns against the books and records of the business. Generally, an audit will cover the most recent prior year returns of up to four years, but if discrepancies arise, the audit can review the records for six years, and more in the case of fraud or criminal activity. The auditors may perform sampling checks on accounting data, checking for anomalies and cover accounting matters such as revenue recognition, side agreements, activities that inflate or reduce revenue artificially.
The primary objective of a Revenue audit is to monitor and enforce tax compliance with Irish tax laws. An audit identifies any additional tax liabilities, and quantifies interest and penalties due. Every registered trade, business and taxpayer in Ireland has tax obligations which must be adhered to in order to remain compliant.
Due to Covid, Revenue have relaxed rules around tax payments and agreed on the deferral of tax payments if a taxpayer is struggling financially. However once the economy picks up, it is likely that Revenue will seek out any non-compliance rigorously in order to enhance the tax exchequer which is a fundamental part of the economy. In January 2021, Revenue have announced that will continue with audit interventions remotely, by contacting clients via post and email, and having skype/digital meetings.
Revenue’s examination of the books and records will analyze financial information to identify any misstatement, fraud or signs of tax evasion. The objective behind this testing is to validate the accuracy and completeness of your accounts. To detect any material misstatements, auditors can check bank statements, invoices, expense receipts, inventory levels and any documents relevant to the tax returns filed.
If testing indicates any errors or misstatement, then further audit testing may occur. So, it is advised first to conduct substantive testing internally to eliminate all the potential issues. If there are non-compliance issues, you can disclose these to Revenue at the beginning of the audit in order to reduce penalties, avoid prosecution and bring the audit to a conclusion more quickly.
Summary – Steps of a Revenue Audit?
In summary, the steps involved in a revenue audit process are as follows:
- Firstly, the auditor will describe the purpose of the audit and how long this process is likely to take
- You will be asked if you wish to make a qualifying disclosure of any non – compliance matters before the audit begins
- The examination of your books and records will be carried out either on site or in Revenue’s office
- You will be asked for any additional information required or to explain matters that are questioned
- You will be informed when their review is concluded
- A review meeting will be held with you to address any concerns, identify areas of non-compliance and if any returns need to be amended.
- The auditor will provide written notification on the findings of the audit and what is required to address the issues
- A final interview is held where any additional payment of tax, interest and penalties is agreed
The audit process can be stressful and time consuming, with high tax liabilities at stake. You may not have much knowledge about the tax laws being discussed. It is strongly advised to have professional tax representation with you for dealing with all communications with Revenue, so that the process is managed and concluded with the best outcome possible.