That’s a question I put to two auditors at a recent audit meeting and the answer was: “Ah, we kinda left ye alone for a while with COVID etc. but we’re mostly finished with Temporary Wage Subsidiary Scheme checks and similar now so, yeah, we’re back to business as usual and ye can expect to see more of us”. Ah, that’s great, says I!

There does seem to be more activity (more on this anon) and at all “levels” of the Code of Practice for Revenue Compliance Interventions (“the Code), the most recent version of which hit the streets in mid-22. Readers will be familiar with the typical format of a Revenue query letter but the “new” levels (there are three; as well explained in Chapter 1 of the Code) need attention, as follows:

• Level 1 is a general request for information (much like the “old” aspect query); it is often a “nudge” (a term HMRC likes) and still affords the taxpayer or agent the ability to make an unprompted disclosure (the significance of which is explained further below). For example, Revenue has been busy with share option and similar queries – the Level 1 letter showed the taxpayer that Revenue thought he/she hadn’t dealt with it properly (typically based on employer share scheme returns) and the letter was a chance to sort it out before the intervention level was escalated (and the cost of settling rose).
• Level 2 is now split in two – there is still the “old” Audit but now also the “new” Risk Review (which is typically more targeted in looking at a single tax-head or even a single issue within that tax-head; consequently, Risk Reviews tend to close out more quickly than Audits). When it comes to disclosure options under Chapter 2 of the Code, both have the same effect – on receipt of a Level 2 letter, it is too late to make an unprompted disclosure but, with an eye on penalty mitigation and possible publication, thought needs to be given to whether making a prompted disclosure is wise. On that, one potential trap for the unwary is the “desk” audit whereby the Level 2 intervention is dealt with “by way of correspondence”. The potential trap? Responding in writing to Revenue’s queries in their letter before indicating the taxpayer wishes to make a prompted disclosure means it may be too late to do so. Why? The written response can be deemed to be the start of the intervention.
• Level 3 is pretty much as it was – it is an investigation as Revenue’s “intelligence” (gleaned from many sources) suggests potential serious non-compliance and there is typically no protection (in terms of penalty mitigation) under the Code for the taxpayer. Level 3 letters need to be taken seriously as the next step could be a move from civil penalties to criminal sanctions.

Sure, Chapter 2 of the Code is where to look. Before getting into qualifying disclosures (“QD”; Para 2.8) and the QD penalty levels (see table), make sure you check out possible options under:

• Self-correction (Para 2.2),
• Innocent error (Para 2.3),
• Technical adjustment (Para 2.4), and
• No “loss of revenue” (Paras 2.5 and 2.6)

These, where/when available, generally afford a “cheaper” outcome (i.e. lower penalties) than a QD.

The period to prepare a QD is worth noting, particularly Para 2.10.1 re a prompted QD (“PQD”) where a 60-day extension is available; I see this used quite a bit. Two notes of caution – the request needs to made (typically via MyEnquiries) within 21 days of the intervention notification letter and, if the extension is sought, Revenue’s expectation is a PQD will be made.

Co-operation also assists with penalty mitigation; it is covered in Para 2.17 – note, it must be “full”.

This table summarises penalty mitigation opportunities with QD etc.

Para 4.6 of the Code is where to look. The factors indicating deliberate conduct are clear; those for careless are arguably less clear (and more subjective).

There is a school of thought (and some case law emerging in other common law jurisdictions) that a prudent taxpayer who takes advice from a tax “expert” can’t be regarded as “careless” if Revenue subsequently challenges the expert advice and prevails. To date, that argument typically cuts no ice with Revenue, but it is an evolving area so watch this space.

Whether “careless” behaviour is with or without “significant consequences” comes down to simple maths – see Para 4.6.3; this can be crucial in the context of publication.

Basically, the position is as set out in Para 5.2 of the Code; statutory exclusions from publication are:

• If a QD is accepted by Revenue, or
• If the settlement figure (for tax) does not exceed €50k, or
• If the penalty amount does not exceed 15% of the additional tax due, or
• A qualifying avoidance disclosure (QAD) is accepted (see Chapter 7 re avoidance).

Once a taxpayer is within any one of these four exclusions, there can be no publication. It is somehow counter-intuitive that a “normal” taxpayer suffering a 30% penalty can be published but a punter who has engaged in (what Revenue regards as) avoidance can’t be if he/she is within the QAD regime (see Para 7.15). I understand this is being looked at.

That is my experience; there are “dedicated” anti-avoidance teams (e.g. in Large Cases Division) with a wide mandate to find (what they regard as) avoidance. They are quite active at present both in finding new cases (with a current focus on, to take one example, Section 817 and ER/RR claims where Revenue may seek to challenge CGT treatment to deem the capital sum received to be income) and in closing out “legacy” ones (e.g. the “Liberty” scheme). In my experience, with the right fact pattern and engagement with Revenue there may still be no publication in avoidance cases.

It varies from division to division (e.g. Medium Enterprises Division typically has a different focus to, say, Personal Division) and from time-to-time depending on what areas Revenue thinks are “risky”. Space prevents much further elaboration in this article however I cover this in the quarterly eBrief update CPA Ireland webinar. Apart from a current focus on landlords, an area where they will be very active is in the “employed v self-employed” space as the full impact of the Karshan (Domino’s Pizza) Supreme Court decision late last year has yet to be felt. They are also up to date with social media (influencers are under the spotlight) and income from “platforms” (e.g. Only Fans, which is nothing to do with the GAA…).

Revenue is getting more active now on interventions and we can expect more letters.

Knowledge of the Code and how to use it is key in seeking to limit the damage, both monetary and reputational (if publication “bothers” a taxpayer), for those selected for intervention.