It's great to see a stretch in the evenings and brighter days following the near monsoon earlier in the week. A lot of very stressed-out parents are ecstatic that their little pride and joys and going back to school. Food bills will fall and relaxing tea breaks will rise. The hair is gone beyond ridiculous. It is more of a "hair don't" than a hairdo, like in the Donegal Catch ad. I have put on a few pounds and am putting it down to the weight of my hair. If unexpected bumps start appearing in other places it will be the fault of Seagull bakery. Serious words will be had before the order of brownies and cinnamon buns. For the kids of course!
Last week we had a look at all the information Revenue have on our business numbers and other income. In case you missed it Click here
As a follow on from last week this week we will look at the areas where Revenue will focus on this year. I am talking about Revenue interventions so queries, reviews, and audits. Revenue have limited resources so they will focus on areas where they will get the most bang for their buck. Audits won't be random, so if you get an audit letter Revenue expect to get money from you. Most interaction for advisers with Revenue is on aspect queries. This is through "My Enquiries" where they look for supporting documentation. Revenue's job is to protect the public purse and they are bloody good at it. So, the more money you get from them the more queries you will get to ensure what you got is what you should have got. Audits are more focused. Revenue carry out less of them but they get more money.
You will know that the supports that were due to finish at the end of March will now run until the end of June. The main business supports are the EWSS and the CRSS. The government, through Revenue, has spent more than €6 billion on these and other supports so far. The TWSS was the first wage subsidy scheme of last year and it ran from March until the end of August. For those in receipt of the TWSS they had to deal with Revenue on two occasions since the scheme finished
- Reply to Revenue with supporting documentation to confirm eligibility and payslips etc
- Upload a TWSS reconciliation from your payroll to show the amounts of TWSS you paid to your employees
The letters for eligibility documentation issued from September onwards last year. The reconciliation information was also to go to Revenue before the end of last year. Revenue will follow up on those that haven't replied with the eligibility criteria. They will also contact those that haven't provided the reconciliation data. If you benefitted from this scheme you made a declaration to confirm that you met the conditions. If you don't provide the data that Revenue requested they will look for a refund of the TWSS paid to you. And interest! The key for you is the eligibility criteria when you went into the scheme. Strong back-up would include minutes of meetings and numbers to support eligibility. The focus will be on the 25% reduction in turnover in Q2 2020 and the comparison period
Revenue will begin the reconciliation process in mid-March and they will review. In that, they will review and compare what
- Revenue paid you the employer in TWSS
- What you paid to your employees
This will show if they owe you or you owe them money. For further information See here
For EWSS Revenue will be looking at the eligibility criteria during the scheme. These will ensure there is not a build-up of ineligible claims. As with the TWSS, those who entered the EWSS made a declaration that they meet the criteria of the scheme.
To be eligible you have or expect to have a 30% fall in turnover or customer numbers from January to June 2021. You compare the numbers to the same period in 2019. Not only that, but you must review your numbers at the end of each month to ensure you continue to qualify. For further information on this see our blog See here Like the TWSS there will be a review of cases at the end of the scheme. They will look for your eligibility criteria, supporting numbers, and reviews. This is coming so be sure you have this information now.
For the CRSS more of the Revenue review work will be at the point you enter the scheme. They will check that your business qualifies. You have business premises and there is a restriction on the public from entering it. At registration there is a drop-down list of businesses. If you are not on one of those but in the "other" category, that will result in a check to see if you qualify. Again, there will be a review of cases at the end of the scheme. For more information on this Click here
The advice here would be to go to Revenue before they come calling, if you shouldn’t have benefitted or be in these schemes. Get a qualifying disclosure in place and pay back what you owe.
The final Income tax return filing date for 2019 was the 10th of December 2020. In those returns, Revenue get a wealth of information. You declare all your incomes, your accounts information, and capital transactions. What will interest them is the Capital Gains Tax section. Especially if the proceeds are high and the tax is low.
Carlito and Tanya sold a business in 2019 for €1,400,000. They are married and are in their early 50's. They didn't pay any Capital Gains Tax [CGT] and claimed Retirement Relief on the tax return. They each have proceeds of €700,000 but no CGT liability. Revenue will take notice of this. Their dates of birth are on the tax return and both are not over 55, so did not qualify for this relief. So, Revenue would expect a CGT liability here and a CGT payment made in December 2019 or January 2020. They will make contact Carlito to see if his way was the right way or the wrong way!
If you sell a business for €1,000,000 and pay 10% CGT by claiming Entrepreneurs Relief you have saved €230,000. Revenue will check that you meet the conditions of the relief. Other areas that will be of interest will be;
- Large proceeds but little or no CGT paid from use of losses
- Family asset transfers
- Goodwill valuations on business transfers and a claim to Retirement Relief /Entrepreneurs Relief
- Property Disposals but no tax paid or no disposal details on a tax return
On business transfers they will focus on claims for Business Property Relief. Of particular interest will be the amount of cash on the balance sheet on transfer. Excess cash will be a focus.
Last week we mentioned rental income and share options. If you got share options, it is likely you are a higher rate taxpayer. Not only that but if you get share options you are a chargeable person. This means that you must file an Income Tax return form 11. The potential loss to Revenue is 52% tax on the share options [40% Income Tax, 4% PRSI and 8% USC]. The tax is due within 30 days of getting the option. Failure to file a tax return on time results in a 5% or 10% surcharge on your tax liability.
Your letting agent must give details to Revenue of your rental property and the income you get from it. For their 2020 returns, the letting agent must also include your PPS number and property id. As Revenue have this information, they will expect you to do your bit and have it on your return.
Online booking platforms like Airbnb will also report earnings for their hosts. Like letting agents, they must now give the PPS number and property id to Revenue. See here
Even us accountants are in their line of sight. They recently won a case in the Tax appeals commission. Revenue won a case where the accountant was of the view that the close company surcharge didn't apply to them. So, accountants trading in limited companies who haven't paid this surcharge beware!
There will always be sectoral reviews focusing on specific areas of the economy. Revenue will take the view that there is a tax leakage and focus on those sectors.
The purpose of the above is not to frighten you. It is to give you some flavour of where Revenue will look this year and why. The main focus will be on the support schemes because of the sheer volume of money involved. This will drain a lot of their resources so for you, make sure your numbers and paperwork stack up. Deal with all requests quickly but be ready if they enquire further. Larger transactions on tax returns will be a focus, especially where there is little or no tax paid. The other areas of income are low- hanging fruit. They have the information already, so don't cost yourself more by not doing a return or doing a bad one.
Interested in getting looked after properly. Call Deirdre on 051396703 or contact us. Tell us a bit about you to see how we can help.