Prompted Qualifying Disclosure

A prompted qualifying disclosure is one that is made to Revenue after an audit notification letter issues but before the date that they start their investigation into your tax affairs.

 

There are significant benefits in making a prompted qualifying disclosure. Firstly the penalties that you face are greatly reduced. Secondly, your name will not be published on Revenue’s list of tax defaulters if your qualifying disclosure is accepted. Finally, Revenue will not initiate an investigation with a view to criminal prosecution where a taxpayer makes a qualifying disclosure.

 

When our clients receive an audit letter, the first thing we do is determine if a disclosure is required, if this is the case we must make a request in writing to delay the commencement date by 60 days, this gives us 2 months extra to prepare for the audit. During 2013, we represented 9 clients during audits, without the need for the directors or business owners to be involved in the front end negotiations, this reduces the stress and fear of dealing with an audit significantly and can lead to a better result for the client.

 

Two types of tax default

The first is where the tax default occurred as a result of deliberate behaviour i.e. there was intent on your part to underpay. In this case, your qualifying disclosure must include details of all tax defaults as a result of deliberate behaviour for all taxes (income tax, VAT, PAYE, etc) and for all years.

 

The second type is where a tax default occurred merely as a result of careless behaviour. In this case, the disclosure must include details only of the matter giving rise to the tax underpayment for the period under review. The disclosure must include a declaration that all matters contained in the disclosure are correct and complete. It must be accompanied by payment of the tax and the interest (not the penalties) on the late payment of the tax

 

What are the penalties?

In making the qualifying disclosure to Revenue it is not necessary to quantify and pay the penalties immediately. These can be agreed and paid afterwards. The level of penalties imposed depends on whether the tax default arises as a result of deliberate or careless behaviour.

 

If the tax default arises by reason of careless behaviour, the penalties can be negotiated down to as low as 10% of the underpaid tax liability where there is both cooperation and a prompted qualifying disclosure. Even in the case of deliberate behaviour, penalties can be reduced significantly if the taxpayer co-operates fully with Revenue and makes a prompted qualifying disclosure. Penalties can be reduced to as low as 3% of the underpaid tax where an unprompted disclosure is made before an audit notification is received.

 

Conclusion

What you need is an experienced Irish tax advisor in your corner, someone who has been through the Revenue audit process many times and knows fully how they work.

 

If you have been selected for a Revenue Tax audit, call us today.