Authored by: 

Aidan Lucey
Partner, Tax Risk & Controversy, PwC Ireland

Mark Barrett
Chartered Tax Adviser, RDJ

Introduction

The Revenue's new Code of Practice for Revenue Compliance Interventions ("the Code") came into effect on 1 May 2022. This Code superseded the previous Code of Practice for Revenue Audit and Other Compliance Interventions, which was drafted in 2015 (hereafter referred to as "the previous Code").

The Code was redrafted to reflect the introduction of Revenue's new Compliance Intervention Framework, which also came into force on 1 May 2022. The Code provides a set of guidelines on the components of, and principles underpinning, the new framework.

The most fundamental changes to the Code relate to Revenue's revised classification of compliance interventions under the new framework and taxpayers' ability to make a qualifying disclosure upon notification of same. Revenue also took the opportunity to refine and streamline the broader aspects of the Code. Although many of the key provisions remain unchanged, there are a number of important amendments that taxpayers and practitioners should be aware of.

In this article we explore the core components of the Code and the new framework. While the new framework is still very much in its infancy, we also assess some of the early trends to emerge.

Rationale for the Change

"We will continue to encourage selfreview and correction by taxpayers. We will implement a revised framework of compliance interventions that supports early and effective engagement to address non-compliance, based on the level of risk and taxpayer behaviour."

This statement, included in Revenue's "Statement of Strategy 2021 to 2023", which was published in January 2021, was a clear indication that changes were coming. In some ways, it should have been no surprise. Revenue is continually evolving its structure and refining its approach in an effort to confront non-compliance. For example, in recent years we have seen enhancements to its data analytics capabilities, a shift to e-audits and a realignment of its operating structure.

That said, the key components of Revenue's Compliance Intervention Framework had been in place since 2010 without much formal modification. The landscape has changed a lot since then:

  • Scope of non-audit interventions: The nature and application of non-audit interventions have evolved. For example, "aspect queries" were originally designed to focus on a specific aspect of a tax return. More recently, it was not uncommon for aspect queries to span multiple tax heads and lead to multiple information requests, in many ways morphing into quasi-audits.

  • Risk profiling and data analytics: Revenue now has access to vast quantities of data relating to the taxpayers' affairs, and this has evolved significantly in recent years. Although a large proportion of this data is provided by taxpayers themselves in respect of their own affairs, Revenue is deriving increasing amounts of information on its case base from third-party sources such as foreign tax authorities, financial institutions and third-party returns. Revenue has invested significantly in its analytics resources to optimise the use of this data in risk profiling taxpayers. This means that Revenue is now far better equipped to identify the higher-risk taxpayers in its case base.

  • Real-time reporting: The introduction of real-time reporting, and more recently the administration of Covid-19 supports, has given Revenue access to a huge volume of taxpayer data that is being used to generate real-time insights into taxpayer behaviour and risks. This has resulted in the upstreaming of interventions.

  • Co-operative Compliance Framework (CCF): CCF was relaunched in 2017 to facilitate the development of a relationship between Revenue and large corporates based on trust and transparency from both parties. Voluntary tax compliance is at its core. CCF has reshaped the way participating companies manage their compliance risk and how Revenue interacts with them.

The above are just some examples of the types of measures that Revenue has introduced to confront non-compliance. In light of these developments, it was important that Revenue's suite of compliance interventions and the principles underpinning them were fit for purpose in the current landscape.

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This article first appeared in Irish Tax Review Issue 1 (2023) © Irish Tax Institute.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.