Businesses have had to adapt to a broad spectrum of challenges since the onset of the COVID-19 pandemic and so too have the Revenue Commissioners, who have been proactively engaging with taxpayers to address the extraordinary operating environment for businesses.
The Revenue Commissioners have recently published guidance on how tax interventions and audits will be conducted for so long as businesses remain impacted by the COVID-19 pandemic. The guidance is designed to work in conjunction with the longstanding Code of Practice.
We have highlighted below some of the key points for taxpayers seeking to manage their interactions with Revenue over the coming months.
Electronic and hard copy correspondence
Revenue's guidance recognises the challenges faced by taxpayers, agents and Revenue alike in sending and receiving postal correspondence whilst most people are working from home in accordance with Government guidelines.
Revenue's new guidance makes clear that non-audit compliance intervention letters (i.e. assurance checks, aspect queries and profile interviews) can be issued by Revenue via MyEnquiries or secure email where the taxpayer and / or agent is approved for Transport Layer Security (TLS). In the exceptional circumstances where a hard copy document is required (e.g. where a taxpayer or agent is not registered for Revenue Online Service (ROS), Revenue will ensure telephone contact is initiated with the taxpayer also. Taxpayers and agents are urged to communicate with Revenue via the MyEnquiries electronic mail system.
In line with the Code of Practice, Revenue should provide taxpayers with 21 days' notice of an upcoming audit. In practice, Revenue will endeavour to contact taxpayers by telephone to alert them to the fact a letter is being issued. The audit notification should then be issued via MyEnquiries or TLS on that same day. Revenue's notification letter is an important event because it brings to an end the opportunity for a taxpayer to make an "unprompted qualifying disclosure". This marks the end point for the potential application of reduced tax-geared penalties for unprompted disclosures.
Aspect queries will continue to be conducted through correspondence and profile interviews should only be conducted in exceptional circumstances during the COVID-19 pandemic.
Any settlement offer from the taxpayer should be submitted to Revenue in writing, via MyEnquiries or hard copy by post with notification through MyEnquiries.
A notice of assessment should continue to be issued as normal, with the taxpayer and / or agent notified via MyEnquiries or email if TLS is enabled.
Revenue's guidance indicates that audit and non-audit compliance interventions will be conducted remotely where possible, using video-conferencing. SkypeforBusiness is Revenue's preferred video-conferencing platform, but taxpayers may notify Revenue of any proposal to use an alternative platform via MyEnquiries or TLS.
Revenue will request taxpayers to produce books and records, either in electronic or hard-copy form before the initial interview is conducted. The guidance clarifies that after the initial interview, examination of the books and records begins, and the Revenue audit will be regarded as having commenced. In the case of a desk audit, the audit is considered to have commenced on the day after the period of notice regarding the audit has expired. The date of commencement of the audit is another important milestone as it marks the end point for a "prompted disclosure" which can again have an impact on mitigation of penalties.
Taxpayers are encouraged to use the Revenue File Transfer Service as much as possible. Where electronic records are not available, physical books and records should be delivered to the Revenue office. It is recommended that the taxpayer (or its agent) arrange for the delivery of the books and records to Revenue.
A taxpayer's inability to produce records is unlikely to delay the commencement of an audit or extend the period in which to make a prompted disclosure. Where Revenue considers that a taxpayer is using COVID-19 as an unjustifiable excuse for not providing documents, Revenue may consider the taxpayer to have failed to cooperate. Taxpayer cooperation is one of the factors to be considered by Revenue in determining penalty sanctions.
The new guidance clarifies that for Revenue investigations – being those interventions where Revenue believe a serious tax or duty evasion occurred or a Revenue offence may have been committed – there is no change to the process and procedures set out in the previously published Code of Practice. In cases where Revenue is commencing such an investigation, taxpayers should expect to receive a notification in hard copy by post and the process for conducting interventions should remain the same.
Privilege attaching to legal advice
The publication of this new guidance is a timely reminder of Revenue's desire to progress interventions. Although the onset of the COVID-19 pandemic may have impacted the conduct of interventions somewhat during 2020, it is likely that interventions will progress more quickly from now onwards.
Taxpayers often seek advice following receipt of inquiries from Revenue and we recommend that taxpayers do so early in the process. Although documents created by a taxpayer or their agents may be confidential, they will not attract legal professional privilege under Irish law, where litigation is not reasonably apprehended, unless those documents are generated for the purposes of seeking or receiving legal advice from a practising lawyer acting in that capacity.
If taxpayers wish to avail of legal advice privilege, consideration should be given to engaging lawyers for the advisory team at the outset of the process.