Contractors & Revenue Audits

09/04/2023Noone Casey: Contractors & Revenue Audits

Contractors & Revenue Audits


Anthony Casey, managing partner Ireland’s leading advisors to professional

contractors for over 20 years Work hand in hand with all of Ireland’s leading

agencies Developed I-Finance, market leading cloud

based solution to Contractors finances Met with Revenue in March 2013 re

Contractor Project Ensuring our clients pay the appropriate tax

without Revenue audits

Noone Casey


Principal Officer Cork South West District & Regional Office South West Region

Instigator of Contractor project in South West region

Eoin O’Domhnaill Revenue Commissioners


Limited company contractor Composite Company contractor Umbrella company contractor Mitigate risk of audit Minimise tax liability

Anthony CaseyNoone Casey


Structure:◦ one contractor beneficially holding 100% of own

company Revenue challenging travel & subsistence

and home office expenses Revenue identifying target companies for

audit

Limited Company Contractor


Revenue Audit criteria:◦ Directors salary/fees/pension < 85% of turnover ◦ Expenses > 5% of turnover

Limited Company Revenue Audit

85

5 10

% of turnover

Directors salary

Expenses

Retained profit


REAP; Risk Evaluation Analysis & Profiling system

Revenue audit data based on last filed accounts

Mitigate risk by filing current year accounts with reduced expenses asap

Limited Company Audit Data


If notified of audit◦ Contact accountant/advisor asap◦ 4 years period◦ Penalties

Non prompted disclosure 10% of liability Disclosure 50% of liability Non disclosure 75-100% of liability

Example of Revenue notification letter in pack

Contractor Audit Penalties


◦ Vouched expenses ok◦ Unvouched expenses (for audit settlement

purposes only) Turnover < €50k < €75k €2,000 Turnover €75k - €100k €3,000 Turnover > €100k €4,000

Contractor Expenses


Structure:◦ 6 contractors holding 15% shareholding◦ Remaining 10% shareholding held by service

provider◦ No payment of employers PRSI 10.75%◦ Travel & subsistence – where is the company

office?

Composite Company Contractor


Restriction of unvouched expenses◦ Turnover > €100k ◦ €4,000 expenses per company rather than per

contractor◦ 6 contractors €650 each?◦ Clarify status with Service provider asap

Composite Company Expenses


Revenue challenge to PRSI status of directors

Many contractors claimed Proprietary Director status i.e. S1 status no employers PRSI 10.75%

New document issued clarifying 50% shareholding required for S1 status

Revenue to issue clarification of existing cases in near future

Composite Company PRSI


Part 2 of Schedule 1 to the Principal Act is amended by inserting the following afterparagraph 6:“7.Employment in the State in a company under a written or an oral contractof service, whether expressed or implied, where the employed person is—(a)the beneficial owner of that company, or(b)able to control 50 per cent or more of the ordinary share capital ofthat company, either directly or through the medium of othercompanies or by any indirect means.”

Social Welfare & Pensions Act 2013


Contractor will be notified personally as a director of company

What control do you have over the audit? Can you make an individual disclosure if

appropriate? Need to talk to service provider asap

Composite Company Revenue Audit


Issue re ownership of potential tax liability Liability may rest with company

◦ Directors legal responsibility under company law Is contractor liable for other contractors

debts? What does your contract say?

Composite Company Liabilities


Composite company model is broken as a result of PRSI changes Preferable to contract through limited

company Talk to existing provider about restructuring If dissatisfied with existing advice talk to

Noone Casey

Composite Company Model


No room to manoeuvre Remember penalties

◦ Unprompted disclosure 10% penalty ◦ Prompted disclosure 50% penalty◦ No disclosure 75-100% penalty

Possibility of raising funds?

Contractor Revenue Audits


Example

Contractor Audit Settlement

€k €kTurnover 100

Disputed expenses 20

Allowable unvouched expenses 4Additional taxable income 16Additional tax (IT,PAYE/USC) 8Penalties (disclosure 50%) 4Interest 1Total 13

For 4 years 52


Revenue statement on Travel & Subsistence (in pack)

Overly restrictive & contradictory Being challenged by Noone Casey, Institute

of Taxation & other interested parties No option but to adhere to Revenue

statement at present If changes, retrospective claim

Where to from here?


Every contractor must review financial/tax status to assess risk

Potential downside of Revenue audit is too great

We will carry out free assessment for all attendees at this seminar

Prompt, independent, expert advice Take control of your financial position

Time to talk


Questions


Anthony Casey /Diarmuid RyanNoone Casey9 Fitzwilliam Square EastDublin 2 Telephone: (+3531) 676 6476Email: [email protected] Web : www.noonecasey.ieTwitter: noonecasey LinkedIn: Anthony Casey

Contact

mailto:[email protected]

http://www.linkedin.com/profile/view?id=3984082&trk=hb_tab_pro_top

Economy & Finance

Contractors & Revenue Audits