Revenue have extended their review of 'Contractors' and their companies and now such companies and their directors are being reviewed in the Dublin Region.
The companies being selected for review are where the main source of income is a contract or contracts “for service” with a larger company or companies (directly or through intermediaries), and where the company in question does not appear to have a substantial business separate from these contracts. In most cases the director(s) are the only employees of the company and pay tax through PAYE. To date, Revenue have established that in many cases there are deficiencies in accounting for input costs and expenses, with the result that there has been significant understatement of tax liability to the benefit of the director(s). The areas of concern include motor and travel deductions as well as other 'expenses' not for trading purposes.
Because of the nature of the underdeclaration, Revenue are taking the view that the provisions of the Code of Practice for Revenue Audit require them to regard the underdeclaration stemming from deliberate behaviour. This has the consequence that an unprompted disclosure attracts a penalty of 10%; a prompted disclosure made after receipt of a notice of audit is penalised at 50%; and failure to make a disclosure, or to make a complete disclosure, moves the penalty to between 75% & 100% of the tax underpayment which will also be subject to interest.
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