Irish Tax Institute Submission to Revenue

Further to our recent communication, we have had a further update from the Institute of Tax in connection with the Revenue National Contractor’s Project. The Institute has made a detailed submission to Revenue on difficulties with the National Contractors’ Project.

They are hopeful that a resolution can be found to these difficulties. The executive summary is printed below and I have also attached a link to detailed report.

The Institute is awaiting a response from Revenue to this submission and has been informed that a response will be due in the coming days. We will send a further update upon receipt of Revenue’s response.

OSK Contracting, the leading contractor accountant in Ireland, specialises in advising contractors and we have a wealth of experience in dealing with Revenue audits. We can assist you to prepare for the audit, to deal with Revenue and to negotiate settlements on your behalf. Contact Imelda Prendergast, OSK Contracting for further information on 01 4394206.

Irish Tax Institute Submission – Executive Summary

 The reason for making this submission is that hundreds of compliant taxpayers are currently involved in the Revenue contractors’ project and are incurring significant compliance costs. They are worried about the impact this is having on their business and are feeling significant confusion and stress as a result.

It would appear that a small number of contractors have over-claimed expenses and this matter should be tackled by Revenue. However, a range of serious practical issues, impacting on compliant taxpayers has now developed with the roll out of the current project on contractors.

We have collated a number of real life case studies from our members across the country (below), which we believe will give a good understanding of the difficulties being faced.

1. Revenue had previously given a clean bill of health to many contractors

Many contractors were claiming travel expenses on the basis of mileage incurred. However, there were some who applied a rule of thumb on un-vouched expenses that was common in the industry. There was no dishonesty involved in this conduct and in fact, Revenue had actually audited a number of these cases. The same cases are now subject to Revenue’s new regime applied on a retrospective basis.

2. Bona fide travel expenses are being disallowed

Travel expenses are being treated as disallowed in situations where employees would be entitled to the reimbursement of the same expenses tax free. Revenue is also seeking a penalty for deliberate  behaviour in these cases, in addition to tax and interest for 4 years.

3. Genuine salary expenses are being disallowed

In many cases, Revenue is seeking to disallow the salary of a spouse working in the business and paying PAYE on their salary.

4. Guidance on foreign travel and subsistence is contradictory

Revenue’s guidance in Tax Briefing No. 3/2013 appears to contradict the guidance issued in IT54 as regards foreign travel and subsistence.

5. Inability to pay is a real concern

The combination of the high penalty for deliberate behaviour and the 4 year audit period means that inability to pay is a common issue.

6. Inconsistent treatment of taxpayers is taking place

Lack of consistency in the approach to cases between Revenue districts and regions, is giving rise to confusion and delaying agreement of settlements. The case studies below highlight inconsistencies that are arising under the following main headings:

1. The number of years under audit

2. Expense deductions

3. Salary of spouse

4. Penalties

5. Making a disclosure

6. Who is being audited

What is the profile of the contractors in this project?

Professional engineers and IT specialists are a key resource working for the multi-national sector in Ireland. Some are employed directly by the multinational companies, some are self-employed individuals and others are employees of companies that contract with the multinational(s). This model has been in place and has been relatively unchanged for the past 20 years.

The personal profile of these taxpayers is giving rise to particular hardship in a number of cases and distinguishes this project from previous major projects where wealth or savings may have been available to meet the tax liabilities due.

• These are relatively young workers and often the main provider in the family – the majority are in their thirties and early forties with young children and high levels of personal debt.
• The settlement amounts arising are very substantial. The settlements amounts range from €30,000 to €160,000 and these high amounts are due, in no small part, to the interest and “deliberate behaviour” penalties being sought by Revenue over a 4 year period.
• The age profile of the contractors and their other onerous financial commitments means that inability to pay is a common issue in these cases.
• The position is so serious for some contractors that they have been forced to give up their roles and try to seek other work at this stage.

What is the reason for the urgency?

 Hundreds of audits and other interventions involving contractors are currently open and awaiting resolution. In addition, many more contractors are unclear about their tax status and unsure as to whether they need to make, or should be making, a disclosure.

The pay and file deadline is almost upon us and people are feeling the pressure to get clarity on the situation and bring matters to a practical conclusion before another set of tax returns are filed.

Read the Irish Tax Institute Revenue Contractor Project Submission.

Contact Imelda Prendergast, OSK Contracting for further information on 01 4394206. Contact OSK your Contractor Accountant today.