Nobody wants the Revenue to come knocking on their door. In the last number of years however, the number of calls and letters Revenue have sent out has increased dramatically. While the number of full Revenue Audits dropped from 14,000 in 2010 to under 9,000 in 2013, the number of letters sent out looking for proofs or explanations has shot up from 190,000 in 2006 to over 600,000 in 2013 and the trend has continued upwards since then.
Most of these contacts were based on risk management reviews. Revenue profile the tax returns based on risk factors. The higher the risk the greater the chance Revenue will be contacting you.
The best way to avoid being selected for an audit or review is to get yourself off the Revenue’s risk radar.
- Look to avoid being selected in the first place. It sounds obvious, but how do you avoid being selected? You do this by lowering your risk profile with Revenue. Revenue operates a risk based approach to selecting taxpayers for review. The lower your risk profile, the smaller the chance you will be selected for Revenue audit
- File and pay on time. This is the first best step you can take. Revenue red-flags late filing or underpayment of taxes as major risk factors requiring intervention.
- Good quality accounts preparation. Good accounts software, a high standard of accounts preparation, proper accounting standards applied consistently. Make sure your margins are in line with industry standards and are being correctly presented in the accounts. Revenue red-flag’s unusual gross profit margins and out of line motor / travel or expenses costs.
- Borrowing from your company: If you are operating through a company, avoid borrowing personally from the company. Director loans owing to owner-managed companies are a red-flag risk factor. You may be complying with company law, but are you paying the 13.5% BIK interest you are liable to?
- High cash introduced / low personal drawings: If you operate as an unincorporated sole-trader or partnership don’t have unexplained cash introduced or very low unexplained personal drawings. Revenue will zone in on drawings levels below that expected for your type of business / lifestyle. The way the tax office does business has changed completely in the last twenty years. What was acceptable then is no longer tolerated. Your best defence is preparation. Do the planning now so that you won’t get that Revenue inquiry letter.
Don’t wait, get up to date now!
We are in the middle of the personal tax return season. Revenue will tell you to file on time. So you know the deadline is 31 October. But how do you go about preparing your tax return and getting it right? Have you claimed everything you should? Here are a few tips to put you on the right track.
- Claim in good time – don’t delay. There is a four year time limit for making tax reclaims. Don’t lose out by not claiming in time.
- Use ROS: Revenue gives you a free tax calculation software to file your own return online. It is the easiest way of preparing your tax return, but you are fully responsible for the content. Be careful to fill in the return accurately. An inaccurate return is treated as a late return, leaving you open to penalties and surcharges, even for innocent mistakes.
- Make sure you claim for all allowances and reliefs you are entitled to. The claimable reliefs vary year to year as do the eligibility criteria. Get our checklist of the current reliefs available. It will guide you through the web of claim options and help you decide if a tax reclaim is possible.
- Remember that you can submit tax claims back for up to four years. Even if you have only a small amount of tax to reclaim, it may be worthwhile if can be claimed back in each of the four years.
- But don’t get caught unawares with a tax bill. You are best to have the possible reclaimable tax checked out first. You don’t want any hidden tax liabilities to appear as well.
- Being up to date means better tax planning for the future. Until you know what your tax position is you can’t plan for future years. You only have a month to this year’s tax deadline, but you don’t need to wait until the last minute to file your tax return. It can be done as early as January. Early is better. You get refunds back earlier. You have months to get any payment due sorted.
Don’t wait, get up to date now!
The best way to avoid being selected for an audit or review is to get yourself off the Revenue’s risk radar. If you are selected for a review, there are still things you can do to reduce the time, cost and tax exposure.
- Plan ahead: The time to start planning for a Revenue Audit is well before the letter arrives. You wouldn’t wait until the day you get your holidays to book your hotel. Don’t wait for the Revenue letter to arrive to start plan for a possible Revenue audit.
- What if you are selected for Revenue audit? Once the letter arrives there is one thing you can’t do – ignore it. Be proactive. Start dealing with it straightaway.
- Narrow your focus: Check the tax year or period selected. Concentrate on that. Revenue reviews tend to relate to a specific time period and even to a specific tax type in that time period.
- Should you ask to defer the audit? Definitely – if it clashes with your busy work period, pre-booked holidays or would put an undue strain on you and your staff pulling the information together in the timeframe given.
- Get a pre-visit review done: No matter how organised you are there will be things you may have overlooked when filing your tax returns, both good and bad. Get your accountant or tax advisor to go over your books. The good will help offset the bad.
- Summarise: All the work you will do in the weeks before the Revenue Auditor arrives is very useful and not just for them. You will find out a lot about your business and how well the books are being kept. Uncertainty is removed. You will know where you stand and can face the tax inspection meeting with confidence.
- Write your speech: Now you can direct the meeting and set the tone. You are ready to argue your case and defend yourself if necessary.
- Stay in control: By planning ahead, you will have been well prepared long before the letter arrives. Preparation removes uncertainty. You will know before the Revenue Auditor turns up exactly how to deal with them, and that is half the battle!
Don’t wait, get up to date now.
May 2016 blog
How to – Comply with employment law
Employment regulations are important and useful all the time – not just when things go wrong. Their first and best use is to prevent problems happening in the first place. When there is a workplace issue, the rules make fixing the problem much easier. This is good news for both employer and employee.
Employment law protects the employers and their staff. The problem is the law expects the employer to have the procedures in place. The burden of proof in a dispute will generally fall on the employer. This means that the lion’s share of the planning must be done by them.
So, as an employer, what do you need to do?
Know the basics: Make sure you are covering the basics such as employment contracts, recording of time at work, payslips and the like.
Have a staff handbook of policies and procedures: Staff can’t know they have crossed the line unless they know where the line is. The handbook will cover policies on everything from holidays and sick leave to code of dress and internet usage, from harassment and bullying to confidentiality and competence, from communications to disciplinary.
Keep the policies up to date! Update them for changes in how the business operates or changes in the law.
Make sure your staff know the rules too: A stitch in time…that training day will pay dividends by avoiding problems down the line.
Get all staff to sign off on the policies: Staff should sign off on the policies when you hire them, and once a year after that.
Enforce the rules! Nothing annoys staff more than rules that are enforced selectively. You will end up with unequal treatment and very unhappy workers.
Always follow procedure: In the case of a problem, go to the handbook. Don’t be tempted to ignore procedure. In the event of a dispute, disregarding the process will go against you.
Be prepared for an inspection: Your business is liable to inspection by the National Employment Rights Authority (NERA). Failure to meet your obligations under the employment acts would lead to prosecution.
Don’t wait, get up to date now.
How to: Deal with bank debt arrears
The time when you could ignore your debt problem is over. Banks are now pushing for ‘sustainable’ debt settlements, in line with Central Bank guidelines. This can mean anything from extended repayment periods to asset sales. There may even be pressure on you to sell your home.
Keep talking: Never ignore letters or phone calls from your bank. You should engage with the bank. This will avoid a move to summary judgement because of a lack of co-operation on your behalf.
Assess your situation: You will need to be open with the bank and declare all debts you may have, not just borrowings they have lent you. Ask for a hold on any collection procedures until you complete your personal review.
Be realistic. Promise what you can afford to repay: Calculate what your personal living needs are and then allocate what you can afford to loan repayments and no more.
Get real: Now is not the time to be over optimistic. A ‘blue sky thinking’ deal seems great, but can leave you unable to pay your other bills or force you into default on loan repayments. You could end up back where you started but without the bank’s goodwill.
Get Advice: For small debts go to the free money advice organisation MABS (www.mabs.ie). For larger debt ask a financial expert.
Know what banks expect from you: Your lender is seeking openness and common sense from you in your dealings with them. They expect you to be able to make repayments on interest and capital. Interest only deals are not going to be a runner.
Know what banks can and can’t do: Your lender is looking for a sustainable repayment framework. This will mean a combination of:
1) A sustainable loan with a commercial interest rate.
2) A portion of the loan deferred at a 0% interest rate, which you will be liable to repay in full at a future date (for example on the sale of the property when prices improve)
3) A portion of the loan that is non-repayable but will not be formally written off until portions A and B are fully repaid.
Don’t wait, get up to date now.