Im being audited by Revenue...worried

Hi

I recieved the dreaded letter in the door this morning regarding revenue wanting to audit a particular year 2009 for taxes and duties.

The trouble is in 2008 i over declared my income for purposes of mortgage approval ((silly i now but desparate at the time)) using a much larger quantity of closing stock.

Therefore 2009 accounts showed a silly figure where i made a loss based on sales to purchases indifferences and opening stock.

All duites on imports were paid at point of entry and vat was paid on time but my 2009 end of year looked rediculous to say the least.

Will i be punished for Over declaring on my tax form?

Any help would be gratefully accepted.

Revenue uses a scoring system to identify companies to audit. So the fall in income and funny year-end stock figures probably triggered the audit.

You need to speak to an accountant who has done tax audits - most have.

You will need to disclose the problem. If they have not lost out any tax as a result, they might not be too concerned, but you must get them to look at 2008 and 2009.

Brendan

zoso said:

Hi

I recieved the dreaded letter in the door this morning regarding revenue wanting to audit a particular year 2009 for taxes and duties.

The trouble is in 2008 i over declared my income for purposes of mortgage approval ((silly i now but desparate at the time)) using a much larger quantity of closing stock.

Therefore 2009 accounts showed a silly figure where i made a loss based on sales to purchases indifferences and opening stock.

All duites on imports were paid at point of entry and vat was paid on time but my 2009 end of year looked rediculous to say the least.

Will i be punished for Over declaring on my tax form?

Any help would be gratefully accepted.

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The audit is coming and that can't be changed.

Review (or get an accountant to review) your books and records with an eye to how the Revenue will do so, I would advise getting an accountant to review the records.

Quantify an loss to the Revenue for the stock adjustment (recalculate both years with correct closing stock/opening stock).

Make a disclosure of any other differences you find in step 1 also.

I appreciate how nerve racking it can be to open that envelope and get the news, but most revenue auditors are nice enough people doing their job, in my experience, if you make it easy for them and co-operate in every way, it makes it easier for them to help you.

Once you quantify the amount owing to Revenue (if any) including penalties and interest, propose a settlement agreement (if you are unable to clear it in one go).

J.Ryan said:

The audit is coming and that can't be changed.

Review (or get an accountant to review) your books and records with an eye to how the Revenue will do so, I would advise getting an accountant to review the records.

Quantify an loss to the Revenue for the stock adjustment (recalculate both years with correct closing stock/opening stock).

Make a disclosure of any other differences you find in step 1 also.

I appreciate how nerve racking it can be to open that envelope and get the news, but most revenue auditors are nice enough people doing their job, in my experience, if you make it easy for them and co-operate in every way, it makes it easier for them to help you.

Once you quantify the amount owing to Revenue (if any) including penalties and interest, propose a settlement agreement (if you are unable to clear it in one go).

Click to expand...

+1. As regards a settlement it is cheaper to use any other borrower other than revenue. Do not look for credit from the Revenue unless you have no alternative. Otherwise good advice from Ryan.

Ran this by our accountant recently, father was increasing his closing stock figure to cover mounting losses. While it was in general conversation and not official, overstating closing stock will lead to increased profits and thus increased corporation tax, not less, so there should be no underpayment in that regard. Now whether they'll take you on over the fact that you actually knowingly overstated I don't know, but you could simply say you seriously overvalued your stock one year, and corrected it the following year. In our case it was 50/50, in that we were continually posting the purchase value when the stock was actually reducing in value over time due to various factors. There are a number of ways to value current stock, come up with a valid reason to change your valuation method. You shouldn't have too many problems, as the the corporation tax liability should even out over the 2 years.

Revenue aren't going to be able to tell you that you have mis-stated your stock valuation. All that happened is that you made a calculation error and didn't notice it until the following year's figures were done. Assuming you paid tax at the high rate in both years then Revenue have actually made money as they have received tax 12 months earlier than they should have so there''s no issue there at all. As J.Ryan says, no harm in re-doing the income tax calculations for both years to prove this and inform Revenue about the mis-calculation up-front at the first meeting but as there is no loss to Revenue then there is no declaration to be made in this regard.

Good advice from J.Ryan & simplyjoe as well.

DB74 said:

....but as there is no loss to Revenue then there is no declaration to be made in this regard.....

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The poster may have had other income in the years 2008 and 2009 that could have meant that overstating 2008 income (and recouping in 2009), may have meant that there was a loss to revenue. It is not appropriate to simply state that Case I when added together for both years was correct so no loss.

There were different tax bands over the two years, the income levy was introduced in 2009 and the health levy was higher in 2009.