Revenue Audit - non-paye, what to expect?

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marshmallow

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Hi all, have just received notification of a forthcoming revenue audit on my income. I am a self-employed writer and my incomings/outgoings for the last few years have been erratic and my accounting system a bit of a mess to say the least as income comes from many different sources... Also have rental income from rented property.
Just wondering what information revenue will be looking for? Presumably bank accounts?
Thank in advance
 
Hi Marshmallow,

Yes you'll need bank statements certainly.

What kind of records do you keep of your income / expenses? Are you VAT registered? Who prepares your tax return?

The purpose of the audit is to verify that the amounts on your income tax returns are correct. So how can you show that the amount of your sales / rental income has all been declared - do you receive income in cash, or is it always by credit transfers / cheque? And how can you show that all of the amounts claimed as expenses are legitimate expenses - have you retained the receipts/invoices that support the amounts paid out and claimed as expenses?

If you have done everything yourself, and have any concerns about being able to stand over the figures you submitted on the returns, then you should be getting a decent accountant to deal with the audit for you.

Some audits are random, but very few. The vast majority of audits nowadays are selected based on risk assessments by Revenue, so it is likely that they perceive certain risks in your case - the auditor probably won't explicitly tell you what concerns he/she has, but if you hire a decent accountant they may well figure that out for themselves, and be able to deal with the issues in a way that either satisfies the Inspector that everything is OK, or by making the necessary disclosures and keeping any interest / penalties to a minimum.
 
Thanks so much for your reply. Rental income comes via bank account and I am PRTB registered so should be no issues there.
Re income, I get paid different amounts in different currencies quite haphazardly and most comes via my agency based in London who hold most of my payment records. Have only come into tax net recently with reduction of Artists Exemption and for this reason never claimed expenses as income was tax free. Will the agency need to be involved in the audit too even though they are based in UK?
 
marshmallow said:
Will the agency need to be involved in the audit too even though they are based in UK?
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I'm not an accountant but I wouldn't have thought so if you are self employed and they are outside this jurisdiction. You may need to get certain info from them yourself to help with the audit though - e.g. records of payments made by them to you if you don't already have them. Do you have an accountant? You probably should have.
 
ClubMan said:
I'm not an accountant but I wouldn't have thought so if you are self employed and they are outside this jurisdiction. You may need to get certain info from them yourself to help with the audit though - e.g. records of payments made by them to you if you don't already have them. Do you have an accountant? You probably should have.
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+1 to all of the above - Revenue may not have the power to involve them, but you may well need to get information / confirmations from them in order to substantiate your income.

And you really should have an accountant for this, a decent one will pay for themselves in a situation like this, saving you time, stress, and possibly money.
 
The best thing you can do is get a good accountant to guide you through this. A Revenue audit can be very time consuming, costly and stressful.

If you're not prepared to do that then familiarise yourself with the Revenue audit code available on the Revenue website. It sets out what Revenue can and can't do or ask.

You need to look at the scope of the audit, what taxes are covered and what years. Sometimes Revenue issue an audit notice for "all taxes and duties". If you get one of these then you should be prepared for the auditor to look at absolutely everything, even things you might never think of such as mortgage interest relief.

If it is for a specific tax, eg income tax, you should start with the returns for the years to be audited and have supporting documentation for every figure in returns. You should have profit and loss accounts for each trade and rental accounts for the rental income. You should have supporting documents for each transaction in those accounts.

You'll also need all bank statements, cheque books and lodgement books for the years to be audited - business accounts and personal accounts. You may even need credit card statements.

You mention artists exemption. They'll probably look at your entitlement to that and whether the income you claim under actually relates to it.

You should also look at what tax credits you have claimed and make sure you were entitled to them.

If you think you may have an issue you can make a disclosure and avail of reduced penalties.

It's sometimes useful to give the auditor a call when you receive the notice. I always ask what has triggered the audit. They don't have to tell you, and often don't, but if you explain that if you know what has triggered it then it may help in the preparation they sometimes give some indication.

But, as I said initially, the best thing to do is get a good accountant or tax advisor. It could save you a lot of time, trouble and expense in the long run.
 
Thanks, really helpful stuff there. Have never had an accountant up to now because i never really needed to keep accounts as income was tax free so there was no profit and loss as such. I just declared earnings via Form 11 and then paid PRSI owed based on that. I also have a Uk bank account and credit card that I use for when travelling over there. Will these also be included?
 
Yes, otherwise how can you account for the expenses...!

I don't mean to be smart with you, but if you need to ask questions like these, you need professional help.

EDIT: I assumed you meant travel to the UK on business?
 
I have never claimed any expenses though, just paid for any work-related necessities out of my income as it was completely tax-free up now.
 
See here for the code of practice for audits which will you give a good idea of what to expect.

Also, make sure you have you artists exemption certificate to hand for the audit, although if you've misplaced it Revenue publish a list here of individuals who qualified for artists exemption and the in the case of writers shows the name(s) of the books the exemption related to.
 
marshmallow said:
I have never claimed any expenses though, just paid for any work-related necessities out of my income as it was completely tax-free up now.
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:eek: Well for starters the exemption applies to your profit from your artist's income, not the gross amount you receive. So you would be supposed to deduct your allowable costs, such as materials, travel, light & heat... please just take the advice you've been given here, and go find a reputable accountant / tax consultant to take care of this for you!

A good point was raised by Xeresod, did you ever apply for an artist's exemption, or have you just been assuming that it applies to you?
 
Yes I have the exemption cert. Don't understand the difference between the gross amount or profit though? If profit is tax free then expenses claimed won't change exempt income from a taxation point of view in any case? Maybe this is the reason for audit, although if I haven't claimed expenses I can't see what I might have done wrong.
 
Are you, or should you be, VAT registered? That's one issue that would concern me (could be grounds for an audit).

You have an exemption cert for certain of your work, but how sure are you that it all qualifies for the exemption? (could be grounds for an audit)

And straight away since you're paying Income levy / USC based on your artist's exempt income, you've probably been overpaying by virtue of not claiming your expenses. If you'd had a decent accountant all along you wouldn't have. Point proven I think! ;)
 
Order your credit card statements now for year of audit , they take forever to get ,And make sure you can explain any extravagant payments listed on them etc , flights to Dubai , rollex watch etc :) they even asked me did I own racehorses or greyhounds :) lifestyle is a big thing they try to establish , to see if you are living beond your means or declared means by using undeclared cash . I had no problems and they were very professional and fair , you are given a chance to declare any mistakes before audit starts .Chocolate bickys and a cuppa Joe and all documents and you should be fine .I think you should definitely get an accountant to look over your returns and evidence of expenses so you can present any issues to the auditor instead of them finding it themselves.Good luck .
 
Unlikely if the OP is PRTB and NPPR registered, and declaring a taxable income. If they were not registered and declaring little or no income it could be a factor.
 
I am officially an eejit....

mandelbrot said:
And straight away since you're paying Income levy / USC based on your artist's exempt income, you've probably been overpaying by virtue of not claiming your expenses. If you'd had a decent accountant all along you wouldn't have. Point proven I think! ;)
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marshmallow said:
I am officially an eejit....
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Not to worry, better to find out you overpaid than underpaid, and it could happen to anyone, but I just hope you get yourself an advisor to deal with the audit.

And on the bright side you may be able to pay them out of the repayments of any overpaid Income levy, going back to 2008...!
 
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