Key Post Revenue crackdown on contractors' expenses - what should a contractor do now?

mandelbrot

Former user
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2,330
But the fact remains that they are well capable of handling operational tasks like issuing invoices & charging VAT etc without continually relying on professionals to do the thinking for them.
Not continually, no, but normally in a small business they carry out those operations based on how they've been advised they should, and then they depend on their accountant to periodically check that it's been done right. In the context we're looking at here, people who were moving from being employees to proprietary directors of Ltd companies and felt understandably out of their depth were given specific advice that this was the correct way to do things, and the advice was incorrect.

In the case of yop, which has kicked this whole thing off again, he's a sole trader, and therefore mileage could never be applicable - I stand over my original opinion that regardless of how easily he could have clarified the thing himself, this was something that his accountant specifically told him he could and should do. If your doctor told you to "take one of these twice a day", you shouldn't decide to do otherwise based on some googling!
 

T McGibney

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3,555
I have already said above that if the person whom he used is a practising member of a professional body, he should be seeking redress through the professional body.

That said, caveat emptor...
 

Firefly

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3,067
As an IT contractor, claiming mileage was one thing I looked into when setting up. My accountant was also my father's accountant and I was happy to remain with them. After a few phone calls and meeting them in person they consistently stuck to their opinion that I should not claim mileage as I was travelling to the same customer every day. At the time it was tough going along with this as I have been working with other contractors who were claiming massive amounts of mileage. One particular contractor has been "hit" by Revenue for a lot of money - basically enough to by "a really nice new car". My accountant also has on their books 2 contractors who each owed Revenue between 40k and 60k each...both of them have just left the country.

I remember having a debate here on a different thread with someone who was saying how little tax self-employed contractors paid in tax due to expense claims. I remember telling him that it's true, as someone self-employed you can claim for anything you like...the problem arises when Revenue take a look and disagree! This is now happening.

Having said that, the rules on travel expenses have always IMO been a grey area. As someone who hasn't claimed any mileage it doesn't affect me, but I think it would have been a lot fairer if the Revenue had started with a clean slate after they produced the new guidelines, or at least removed any historical interest/penalties. Ultimately, I see some upward pressure on contractor rates now that contracting is less attractive.

Regarding the focus on Dublin, I have spoken to 2 other contractors recently who reckon that Revenue deliberately left Dublin to the end as it was more likely that contractors there would organise themselves in resistance...remains to be seen.
 

fearbeag

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37
Just wondering how long it takes the Revenue to complete an audit and issue an assessment.
I am currently approaching 700 days.
 

mandelbrot

Former user
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2,330
Just wondering how long it takes the Revenue to complete an audit and issue an assessment.
I am currently approaching 700 days.
How long is a piece of string?!

How many of the 700 days has the ball been in you/your accountant's court?

Some accountants will try to just stall and delay to frustrate Revenue auditors into concluding cases, with varying degrees of success - if it goes wrong it can amount to non-cooperation and result in a higher level of penalty being sought to settle the case.
 

T McGibney

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How long is a piece of string?!

How many of the 700 days has the ball been in you/your accountant's court?
I am aware of cases where taxpayers under Revenue Audit have waited longer than 700 days for a Revenue reply, following mutually-acknowledged full submissions by their accountants of information requested by Revenue.
 

mandelbrot

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2,330
I am aware of cases where taxpayers under Revenue Audit have waited longer than 700 days for a Revenue reply, following mutually-acknowledged full submissions by their accountants of information requested by Revenue.
Hence the reason for my question to the OP, to establish whether their case is of the type I referred to, or the type you referred to!
 

fearbeag

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37
Thanks for the feedback Mandelbrot and T McGibney you have answered my query.

Just to clarify there has been full co-operation with the Revenue since day one, so my situation is like example T McGibney has outlined.
 

Conwhite

Registered User
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1
Keep your chin up fearbeag. They will have to send you an assesment at somepoint. Remember if you were right on day 1, you are equally right now.
 

mandelbrot

Former user
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2,330
Revenue's recently updated Code of Practice for Revenue Audit and other compliance interventions states (at Chapter 5.8):

It is in everybody’s interest that an audit or compliance intervention is concluded as quickly
as possible. Where the taxpayer has dealt with all outstanding queries, and has done so within a reasonable period of time, and the audit/intervention remains open for a further period of three months, Revenue will, on request from the taxpayer or agent, advise the taxpayer of the current status of the audit/intervention and will estimate, in so far as possible, when the audit/intervention is likely to be concluded.

I'd suggest you or your agent should request an update...

 

RichInSpirit

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821
It's just Revenue trying to raise whatever money they can to keep the country afloat. It's nothing personal even though it might feel like it is.
They can't squeeze any more out of Paye workers as everything is black and white with their tax.
 

mandelbrot

Former user
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2,330
It's just Revenue trying to raise whatever money they can to keep the country afloat. It's nothing personal even though it might feel like it is.
They can't squeeze any more out of Paye workers as everything is black and white with their tax.
Utter nonsense.

Edited to add: Nonsense because Revenue's function/approach hasn't changed, it remains to ensure that the correct amount of tax is paid at the correct time. They select cases based on risk and based on experience in similar cases, so if there's a focus on a sector is because there's an identified risk(s) and/or a trend of audits in that sector giving rise to additional tax liability.
 

Zacchaos

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50
Mandelbrot,

Under the 2010 Code of Practice, the Code under which ongoing Contractors Project Audits are being conducted, the onus is on Revenue to advise the tax payer when the audit will be concluded:

4.7 Timeframe for Concluding Audits
It is in everybody’s interest that the audit is concluded as quickly as possible.
Where the taxpayer has dealt with all outstanding queries, and has done so
within a reasonable period of time, and the audit remains open for a further
period of three months, Revenue will advise the taxpayer of the current status
of the audit and will estimate, in so far as possible, when the audit is likely to be
concluded.

I've put "Revenue will advise" in bold. Under the new Code (August 2014), Revenue will advise on request of taxpayer/agent as you've said. So it looks like, taking Fearbeag at his word that everything is in order, that Revenue are not following the Code of Practice in his case.

As for RichinSpirit's comments being utter nonsense - yes there is no change in function of Revenue, however my experience of the approach taken in more recent Revenue Audits is that Revenue are being more aggressive. I have no doubt that they are under pressure to previously uncollected tax - this is the message I've heard from other tax advisers and accountants.
 

T McGibney

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3,555
Utter nonsense.

Edited to add: Nonsense because Revenue's function/approach hasn't changed, it remains to ensure that the correct amount of tax is paid at the correct time. They select cases based on risk and based on experience in similar cases, so if there's a focus on a sector is because there's an identified risk(s) and/or a trend of audits in that sector giving rise to additional tax liability.
Of course Revenue's approach to audit has changed. That is not necessarily a criticism. but a statement of fact. If their approach didn't change in response to an economic calamity that all but wiped out their traditional high-yielding audit sectors of construction, property development, pubs and hotels, something would be radically wrong.
 

mandelbrot

Former user
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2,330
Mandelbrot,

Under the 2010 Code of Practice, the Code under which ongoing Contractors Project Audits are being conducted, the onus is on Revenue to advise the tax payer when the audit will be concluded:

4.7 Timeframe for Concluding Audits
It is in everybody’s interest that the audit is concluded as quickly as possible.
Where the taxpayer has dealt with all outstanding queries, and has done so
within a reasonable period of time, and the audit remains open for a further
period of three months, Revenue will advise the taxpayer of the current status
of the audit and will estimate, in so far as possible, when the audit is likely to be
concluded.

I've put "Revenue will advise" in bold. Under the new Code (August 2014), Revenue will advise on request of taxpayer/agent as you've said. So it looks like, taking Fearbeag at his word that everything is in order, that Revenue are not following the Code of Practice in his case.

As for RichinSpirit's comments being utter nonsense - yes there is no change in function of Revenue, however my experience of the approach taken in more recent Revenue Audits is that Revenue are being more aggressive. I have no doubt that they are under pressure to previously uncollected tax - this is the message I've heard from other tax advisers and accountants.
Thanks Zacchaos, I had a feeling that paragraph had changed in the new code, and didn't have time when posting to check... but the point remains the same, that if the OP wants to know what's going on with his audit he absolutely has the right to ask the auditor to clarify.

As for Revenue being more aggressive in audits, what kind of thing do you mean - aggressive in that they are quicker to raise assessments, or what?
 

DB74

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Messages
1,618
As for Revenue being more aggressive in audits, what kind of thing do you mean - aggressive in that they are quicker to raise assessments, or what?
They are less lenient than in the past with little sympathy for minor errors, even in situations where there is clearly no loss of revenue involved. I've seen a case where a principal paid a subbie about 20 times in one year (all at the correct 0% rate) but the first payment was made before the contract was registered on ROS and the inspector slapped the 35% rate on the first payment plus penalties even though the correct rate was 0% anyway.

I've seen another case involving locums where the status of employees / contractors was disputed by the inspector and they raised PREM assessments going back over 18 months incl interest & penalties. This was before the Revenue briefing on the subject so the company wanted to operate the payroll system going forward but inspector dug her heels in and the company ended up liquidating.

Inspectors don't care about what impact an assessment like the ones above could have on the viability of a business going forward and don't seem to be interested in whether a business has to close down because of a simple admin error where Revenue are not even out of pocket.

Inspectors are acting like they are some sort of commission basis.
 

mandelbrot

Former user
Messages
2,330
They are less lenient than in the past with little sympathy for minor errors, even in situations where there is clearly no loss of revenue involved. I've seen a case where a principal paid a subbie about 20 times in one year (all at the correct 0% rate) but the first payment was made before the contract was registered on ROS and the inspector slapped the 35% rate on the first payment plus penalties even though the correct rate was 0% anyway.

I've seen another case involving locums where the status of employees / contractors was disputed by the inspector and they raised PREM assessments going back over 18 months incl interest & penalties. This was before the Revenue briefing on the subject so the company wanted to operate the payroll system going forward but inspector dug her heels in and the company ended up liquidating.

Inspectors don't care about what impact an assessment like the ones above could have on the viability of a business going forward and don't seem to be interested in whether a business has to close down because of a simple admin error where Revenue are not even out of pocket.

Inspectors are acting like they are some sort of commission basis.
Just playing devil's advocate here:

From what you're saying they're applying the rules less flexibly than they used to?

Revenue senior staff probably have sleepless nights about the possibility that the equivalent of the Garda penalty points scandal would await them if they don't run a very tight ship.

If they had more flexibility to act on their own discretion, would that not pose the risk of at best, an uneven playing field for businesses, and at worst claims of corruption, favouritism, cronyism etc...?

So maybe what's perceived as a lack of flexibility or leniency is a manifestation of things that everyone has been clamouring for - increasing accountability and transparency - knowing that their audits may be subject to internal audit, that the Comptroller & Auditor General's people will be around questioning how they have applied the rules, and potentially being the poor Inspector whose name ends up mentioned at PAC or in the Sunday papers...

Just playing devil's advocate!
 

T McGibney

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3,555
There is very little openness and transparency about Revenue's recent attempts to retrospectively rewrite the tax code on subjects such as locum doctors and contractors, to suit their own agenda.

If their poor bosses lie awake at night fearing public persecution for not hammering businesses and individuals hard enough, they should either quit or ensure that their organisation pursues similar performance goals and strategies as their international counterparts such as HMRC.

If they take the latter course of action they will learn that it is possible to achieve fulfillment of those goals and strategies without having to make up the law as they go along or adopting ridiculously inflexible approaches to what are often extremely technical compliance issues.

All of this a long way away from the Garda response to the penalty point scandal...
 
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