Customs interventions do not fall under the Code. This is because these activities are provided for by the EU Union Customs Code and EU legislation rather than national legislation. Finance Act 2022, which was enacted in December 2022, extends the Code to include Excise Law.

It replaces the Code of Practice for Revenue Audits and other Compliance Interventions 2019 (the 2019 Code) however compliance interventions that were in progress prior to 1 May 2022 will continue under the 2019 Code.

The revised Code reflects Revenue’s new Compliance Intervention Framework which introduces changes to Revenue’s approach to compliance interventions and changes to disclosure opportunities for taxpayers.

The revised Code introduces a new three-level Framework for compliance interventions, as follows:

• Level 1
• Level 2
• Level 3

These levels reflect a new graduated response by Revenue to compliance risks and taxpayer behaviour. This approach is based on Revenue’s fundamental principle that it is the responsibility of taxpayers to file accurate and timely tax returns.

All compliance intervention notifications issued from 1 May 2022 will include a reference to their categorization as Level 1, Level 2 or Level 3 compliance interventions. The issue of non-audit interventions (referred to as “Aspect Queries”) ceased from 1 May 2022.

Level 1 compliance interventions are intended to support voluntary compliance through reminding taxpayers of their obligations and providing the opportunity to correct errors before Revenue commences an inquiry into the matter.

Level 1 interventions only occur where Revenue has not already engaged in any detailed examination or review of the matters under consideration. Examples of such interventions are reminder notifications of outstanding tax returns, requests to a group of taxpayers to self-review their tax returns for a particular issue, profile interviews and engagement under the Cooperative Compliance Framework.

Taxpayers can address and rectify compliance matters under the Level 1 category through the self-correction provision (where the taxpayer is within the relevant time limits) or by making an unprompted voluntary disclosure.

There are two types of Level 2 compliance interventions – Risk reviews and Revenue audits. These interventions are focused on confronting compliance risks.

Risk Review

Risk reviews are a new type of Revenue enquiry which Revenue has stated is a focused intervention to examine a risk or a small number of risks on a return. The Risk Review replaces the Aspect Query.

Risk reviews are equivalent to Revenue audits as regards the type and scope of qualifying disclosure that may be made by the taxpayer in response to the notification. This means that the opportunity to make an unprompted qualifying disclosure ceases from the date a Level 2 notification is issued. A prompted qualifying disclosure may be made up to the date that the intervention begins which is 28 days after the date of the letter. If additional time is needed to prepare a prompted qualifying disclosure, the taxpayer or agent may submit a notice of an intention to make a qualifying disclosure to request a maximum additional 60 calendar days to prepare the disclosure. The deadline for submitting a notice of intention to prepare a prompted disclosure was increased from 14 to 21 days.

Compliance intervention – Revenue Audit

A “Revenue Audit” is an examination of the compliance of a taxpayer, having particular regard to the accuracy of specific returns, statements, claims or declarations. Under the new Code, an audit will be initiated (as opposed to a Level 2 Risk Review) where there is a greater level of perceived risk.

A Revenue audit can cover all risk indicators in a case (across multiple taxes and periods) or it may focus on a single issue / single tax within the case. An audit may subsequently be extended to include additional tax risks depending on matters uncovered by Revenue during the audit process.

The main stages in a typical Revenue audit are unchanged under the new Code, but there are some points worth noting as follows:

1. Notification Letter

• This letter confirms the
  • type of compliance intervention to be undertaken i.e. Level 2 Compliance Intervention,
  • tax head(s) and period(s) covered,
  • the audit commencement date and location,
  • the books and records requested to be made available for inspection.

2. Commencement of Audit

• The audit will begin 28 days after the date of the notification.
• Businesses may request an alternative date where the commencement date is not feasible for the business.

3. Opening meeting

• This meeting provides the taxpayer with the opportunity to demonstrate to Revenue the tax controls in place. The Revenue auditor will raise queries during the meeting and the taxpayer’s responses typically dictate the areas of audit focus and potentially the outcome of the audit.
• At this stage, it is important for the taxpayer to be able to show strong governance and controls to provide assurance to Revenue that tax returns and payments are accurate and timely.

4. Disclosure

• From the date of issue of the letter of notification of a Level 2 Compliance Intervention to the taxpayer and agent (where relevant), the taxpayer no longer has the opportunity to make an unprompted qualifying disclosure. However, the taxpayer may make a prompted qualifying disclosure before the audit commences. Once the intervention begins (or is deemed to have commenced), the entitlement to avail of a prompted qualifying disclosure is no longer available.
• A qualifying disclosure is defined in s1077F TCA 1997 and is one where the taxpayer provides complete information, is in writing and includes certain information.

The taxpayer must declare that the disclosure is complete and correct in relation to the particular tax head and tax period under review. The disclosure must also be accompanied by payment of the tax and interest due. A penalty does not need to be included.

• The information to be included in the prompted qualifying disclosure depend on the category of behaviour giving rise to the tax default.
  • E.g. for a prompted qualifying disclosure in the careless behaviour category of tax default, the amounts of tax, duty and interest for the tax and period(s) within the scope of the proposed compliance intervention should be included.

Level 3 compliance interventions constitute Revenue investigations and arise in cases where Revenue believes from its review of available information, that serious tax or duty evasion may have occurred, or a Revenue offence may have been committed and may lead to a criminal prosecution. The investigation focuses on tackling high risk practices and cases displaying risks of suspected fraud and evasion.

Once an investigation is initiated, the taxpayer cannot make a qualifying disclosure in relation to the matters under investigation.

Some further changes under the new Code include:

• Settlements of up to €50,000 (excluding interest and penalties) are now excluded from publication in Revenue’s quarterly list of tax defaulters. Publication was previously only excluded where the total settlement did not exceed €35,000 (including interest and penalties);
• The taxpayer’s entitlement to made a qualifying disclosure in respect of tax underpayments relating to offshore matters was reinstated;
• Self-corrections must now be notified in writing to Revenue (although this can be done via Revenue Online Service). It is important to be aware that amending a tax return on ROS is not of itself sufficient.

Since the Code came into effect last May, we have gained insights into Revenue’s application of the new framework, in particular to the new 3 tier categorization of Revenue interventions. Experience to date shows that day-to-day enquiries such as VAT refund verification checks, requests for R&D tax credit reports and requests for tax computations fall under a Level 1 compliance intervention.

Investment in technology in recent years has enabled Revenue to develop an increasingly robust and targeted approach to tax compliance interventions. Furthermore, it is expected that Revenue activity will ramp up during 2023, in particular under the new Risk Review category. Taxpayers should be aware that the new Code reduces the opportunity for taxpayers to mitigate penalties once Revenue action has commenced. Experience of the new Code over the past number of months shows that Revenue places more emphasis on taxpayer’s tax controls and governance. It is key that taxpayers can demonstrate these controls in the event of an audit.

For these reasons it is more important than ever that taxpayers proactively self-review their tax affairs on an ongoing basis to identify tax risks. This will help to ensure that penalties are kept to a minimum and the reputational risk of publication on Revenue’s tax defaulters list is avoided.