INTRODUCTION

A new Code of Practice for Revenue Compliance Interventions was recently published. From 1 May 2022, the Code of Practice will significantly change interactions between Revenue and taxpayers. “Aspect queries” are no longer part of the compliance intervention framework and have been replaced and modified by the new concept of a “risk review”. This is significant as it impacts a taxpayer's ability to make an “unprompted” voluntary disclosure. In certain cases, this will increase the level of penalties applicable to an undeclared tax liability.

The Code of Practice confirms that Revenue continues to take a more targeted approach to risk and tax non-compliance. Given the changes, taxpayers should carry out a self-review and consider if it is necessary to make an “unprompted” qualifying disclosure before the new code is operational on 1 May 2022.

This briefing examines some of the key changes and new concepts under the updated Revenue Code of Practise for Revenue Compliance Interventions.

NEW CODE OF PRACTICE FOR REVENUE COMPLIANCE INTERVENTIONS – EFFECTIVE 1 MAY 2022

Revenue recently published its new Code of Practice for Revenue Compliance Interventions (Code) which will come into effect on 1 May 2022. The Code sets out how Revenue will conduct their interventions, what taxpayers can expect when Revenue conduct interventions, and the benefits of disclosing a tax default at the earliest opportunity.

The Code will apply to interventions commenced on or after 1 May 2022. The existing Code of Practice (first introduced in 2010) will continue to apply to current Revenue interventions and those commenced before 1 May 2022.

Whilst much of the existing Code of Practice and its concepts remain unaffected, this briefing sets out some principal changes that taxpayers should be aware of. Given the changes, taxpayers should self-review their tax compliance positions and consider if it is necessary to make an “unprompted” voluntary disclosure of any issues identified before the Code becomes operational on 1 May 2022.

QUALIFYING DISCLOSURES

To fully appreciate the changes introduced, it is important to understand the concept of a qualifying disclosure. In broad terms, this is a written disclosure to Revenue of a tax or duty liability or other errors made on a tax return accompanied by:

  1. a declaration that all matters in the disclosure are correct and complete, and
  2. payment of the tax and interest arising.

In the case of underpaid tax, both interest and penalties can apply. However, the rate of penalty can be mitigated by making a qualifying disclosure and co-operating with the Revenue intervention. Furthermore, a qualifying disclosure will secure the benefit of non-publication on Revenue's quarterly List of Tax Defaulters. Finally, Revenue will not initiate an investigation with a view to prosecution of the taxpayer concerning the matter disclosed.

Qualifying disclosures can be classified as “unprompted” or “prompted”, depending on the timing of the intervention. This will impact the level of penalty mitigation available. An “unprompted” qualifying disclosure is made prior to Revenue notifying the taxpayer that it is initiating certain Revenue interventions (as explained below, under the existing Code of Practice the relevant intervention is a tax audit, however, from 1 May 2022, both tax audits and the new concept of a risk review will be included). A “prompted” qualifying disclosure is made following receipt of the notification of the relevant Revenue intervention but before the actual commencement of the intervention.

Notably, the Code reiterates the Finance Act 2021's reinstatement of a taxpayer's ability to make a qualifying disclosure in respect of “offshore matters”, which had previously been restricted.

NEW GRADUATED RESPONSE TO RISK

The Code sets out a Compliance Intervention Framework intended to provide a consistent graduated response to tax risk. The interventions range from Revenue reminding and encouraging taxpayers to fulfil their tax compliance obligations, to criminal investigations for serious cases of fraud or evasion.

There are now three risk-based intervention levels. Revenue may initiate an intervention at any level in response to a perceived tax risk. An intervention may also be escalated to a higher level during an existing Revenue intervention.

LEVEL 1 INTERVENTIONS

Level 1 interventions are designed to support tax compliance and include:

  • Reminder Notification of Outstanding Tax Returns.
  • Request to self-review a tax return.
  • Profile Interview i.e., a meeting with a taxpayer to understand the business and its tax affairs.
  • Engagement with businesses under the Cooperative Compliance Framework (CCF) (this involves Revenue and the taxpayer agreeing actions to ensure compliance).

Under a Level 1 intervention, taxpayers retain the ability to make an “unprompted” qualifying disclosure in respect of a tax default.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.