Revenue continue to target Contractors
Revenue officials regularly review the tax affairs of contractor companies in Ireland and their directors, particularly in relation to expense claims (especially mileage and subsistence claims) and in recent times there have been many cases that have resulted in the tax liabilities of the company directors being under declared. As a result of their findings Revenue has confirmed that this will be an area of significant focus in the future and will include a wide range of contractors including engineers, project managers and software consultants. In addition, it will not be restricted to contractor companies but will include self-employed contractors, limited companies and directors of companies.
In several cases, Revenue states that they have uncovered “deficiencies in accounting” for expenses which have resulted in “a significant understatement of tax liability to the benefit of the directors”. They regard the under-declarations of tax as stemming from deliberate behaviour and will, therefore, attract penalties ranging from 10% of the tax underpayment (for an unprompted disclosure) up to 100% of the tax underpaid for those failing to make a disclosure. Interest may also be payable so it could lead to contractors facing a liability of more than twice the amount of the initial tax saved.
The issue of allowable expenses for self-employed contractors and company directors is not a new one, and in a routine Revenue audit, it would always be the subject of scrutiny to identify any possible non-compliance. Professional advice is always recommended.
The majority of audits will be in the form of desk audits i.e. letters will be issued requesting information rather than visiting the taxpayers home / premises. The focus will generally be on “exaggerated” expense claims, wages understated, payments to family members, and other expenses claimed. The issue of travel expenses will also continue to be a focus, with Revenue repeating their view that expenses incurred in respect of traveling from home to work are generally not allowable, and will only be allowable in extremely exceptional cases. Notwithstanding that the directors home may be the registered office of the company and they may do a portion of their work from home, if the majority of their work is done from their clients premises it will be very difficult to make a convincing argument to Revenue that the directors home is their normal place of work – this will make the claiming of mileage and subsistence very difficult, if not impossible, in many cases.
For advice on this and other taxation matters please contact FHM Accountants today. If you believe you may have an issue in relation to the over-claiming of expenses please contact us straight away for proper advice and guidance on the matter.
FHM – ‘Forever Helping Management’.