Having tax clearance all the time is very desirable. You only know this when you don’t have it. It could be that you don’t have it now, but don’t realise it. It’s not desirable or attractive in the James Bond sense, but more in the “this puts money in my pocket sense”. Not only that, but not having it means some temporary pain. Something you’ve got to deal with but would rather poke your eyes with hot needles. Let’s look at why tax clearance is so important for your business and talk more about
- What and why
- New businesses
- Connected Persons
- Batch cancel clearance
- Tax Refund
- Good compliance works
What and Why
What is Tax Clearance? It is confirmation from Revenue that your tax affairs are in order. There are no outstanding tax returns. You are compliant by having your tax affairs up to date. You can still get tax clearance even if you have outstanding tax liabilities. In that case, it would be usual to have a payment plan in place.
Why do you need tax clearance? For many reasons, like you can’t run your business without it. Some businesses, such as pubs and bookmakers, need licences to operate. They won’t get a licence without tax clearance in the first place. Other businesses, like pharmacists and opticians, will be in tax refund positions. This is because they’ll have paid withholding tax on their fees from the HSE or the DPS. Revenue won’t issue the refunds, in most cases, if there are outstanding tax issues.
Individuals will need it for a grant or a mortgage application. If you’ve got a rental property, you’ll need it to get the landlord tax credit.
Apply for Tax clearance
When you apply for tax clearance, you’ll get one of three outcomes
- Tax clearance issued. Happy days!
- Tax clearance under review. Waiting in purgatory
- Tax clearance refused. Something needs sorting.
New businesses
Once you register your new business for taxes, the business should get tax clearance. If it’s a new company, to ensure tax clearance, the owners of the company will need to be tax compliant. Getting registered early and getting tax clearance is important for a new business.
Last week, I wrote about a guy who came back from Canada to set up a new construction business. Let’s assume his company gets work with a principal contractor this week. At the end of the week, the contractor goes to pay the company €5,000. As Revenue have no record of the company, they confirm a 35% RCT deduction rate. The contractor pays €3,250 to the company and €1,750 to Revenue.
If the company was registered for taxes with tax clearance, the deduction rate would be 0% or 20%. The new construction company could have an extra €750 or €1,750 in its bank account. Instead, the company suffers a cash disadvantage. Their money is sitting with Revenue, and there’s an effort to get it back. Not the end of the world, but cash is king for start-ups and growing businesses.
Connected Persons
Revenue are clear that they will also assess connected persons of the applicant. So, when they are assessing your application, they are also reviewing the taxes of those close to you. This could be properties that you own, partners, and partnerships that you are in. They would also review other directors and shareholders when assessing a company.
A simple example where an individual wouldn’t get tax clearance is when he or she has a property that doesn’t have LPT paid. It could be an outstanding LPT return for the 2026 to 2030 period. We already had a case where a US-based client had an LPT warning on their 2025 tax return. Once we sorted the LPT return, we applied for tax clearance, and the client qualified for the RPRIR credit. If that wasn’t sorted, the client is down over €1,000.
Batch Cancel Clearance
At the end of each quarter Revenue batch cancel clearance. I looked in our ROS inbox, and we had 14 cancellations on the 31st of December 2025. They were all individuals. Of the 14 cancellations, at least 12 had rental properties. Going into one of those clients now, the message on her page says, “Tax Clearance Rescinded”. Rescinded is a fancy word for cancelled.
We are unaware of the reasons for the cancellation, but all are tax-compliant as far as we can see. We filed their Income Tax returns for 2024 on time, and there are no outstanding tax liabilities. Some could have issues with LPT as an LPT return for 2026 to 2030 was due on the 12th of November, but we can’t be sure of that.
The message is that even if all your taxes are up to date, you still may not have tax clearance.
Tax Refund
If there’s an issue with tax clearance, Revenue won’t give your tax refund to you. They will issue a letter telling you they can’t give you the refund because there’s an outstanding tax return. Usually, the return is either a VAT return of trading details or an Income Tax return, but it can be other taxes, too.
So, your choice is either they hold onto your money, or you sort out the missing return. They have the power as they have your money. Plus, tax law prohibits them from paying it back to you when you have outstanding returns.
VAT RTDs
A VAT return of trading details is a form that Revenue are very hot on. They will regularly refuse tax clearance and tax refunds if there are VAT RTD issues. This form can be complex. It gives a summary of your sales and purchases across different VAT rates. They use this return to compare the numbers to your annual accounts, so it’s important to them. If your VAT RTD is showing a turnover of €500,000 and your accounts show a turnover of €350,000, you’re into red flag territory.
Good compliance works
Good compliance works because it reduces your interactions with Revenue. Most people are allergic and have an irrational fear of Revenue. Think brown envelope with a harp. It’s like getting stopped at a garda checkpoint, and you have tax and insurance. You still feel guilty while totally innocent. Once you do things right, there’s nothing to fear.
Interactions with Revenue take time, cost and uncertainty. It can be a huge distraction for most business people. They are busy and have enough on their plate without bringing Revenue on them. If your accountant is looking after this stuff for you, there should be no surprises. Tax returns filed on time every time, and no payment deadlines missed either.
If there are payment difficulties, it’s best to engage early with Revenue to put a plan in place. That will give them certainty that they’ll get their money, and you’ll have tax clearance. Phased payment plans can work for you and were a huge help to many businesses coming out of Covid times.
Quality Bookkeeping System
Having a quality bookkeeping system can help you have an excellent Revenue record. This eliminates any issues with tax clearance and ensures you get the best deal. I spoke earlier about a new construction company and getting registered with Revenue. Because that company has no trading history here, it will be on the 20% RCT deduction rate for three years.
That’s not the end of the world if you have plenty of cash in your bank account. That money can go towards other taxes like PAYE, VAT, and Corporation Tax. After a year or so, it’s possible to go to Revenue to look for the 0% RCT rate. It helps your case if all your Revenue returns and payments are on time.
Our new client signed up for Xero & Dext. That means we can have access to the company bank statements in Xero. We can also see all the invoices in Dext. We’ll also have visibility of the invoices issued in Xero. It makes our job easier and great for the client, too. We’ll have all the information to complete the company’s first VAT return in March 2026. The client is likely to be in a VAT refund position for that first return. The company is buying a van, tools, and equipment, so there’ll be a lot of VAT paid to claim back.
Having all these invoices at the touch of a button helps with any Revenue queries also. It’s common for them to look for copies of the top 10 invoices when the refund gets a bit high for their liking. With a few clicks of the mouse, those invoices can get to Revenue quickly.
Summary
In my view, Revenue is the most efficient State body this country has ever had. It’s collecting record amounts of tax, and the amount of information at its disposal is vast. Most companies pay tax at 12.5%, so why would you do anything underhanded to save tax at 12.5%? Having tax clearance is good for you and your business. It keeps more money in your pocket and reduces the time spent sorting out stuff with Revenue. Time that you don’t have, and that’s a lot more valuable elsewhere.
Is tax clearance and quality tax compliance important for you? If so, start here
