Revenue enquiries - what triggers them and how can you avoid them?

The Revenue has historically tended to concentrate on the usual areas - requests for analyses of repairs and renewals, fixed asset additions and professional fees. One obvious way to avoid this type of enquiry is to provide the information as a matter of course showing enough detail to make your position clear i.e. not just the name of the solicitor but a narrative e.g. “legal advice on staff contracts”.

So - what’s changed? The Revenue is now adopting publicity techniques to make all businesses aware of its focus on specific areas. One example of this is its focus on shoots where a team of specialists is operating nationally. With this approach all you can do when you are selected is make sure that your records are in order and you can demonstrate compliance.

Sadly, however, the selective approach does not mean that the “scattergun” approach has disappeared. The Revenue’s current theme is to enquire into balance sheet entries such as stock and / or provisions. Again full disclosure can pre-empt an enquiry. If there is a provision for, say, redundancy, show the details and the reason it is deductible on the computation.

New legislation creates new opportunities for business eg research and development relief but also then creates new enquiry opportunities. Again provision of full details and the back up to the claim may help.

There has been a survey of current enquiry topics – the list is, in order:

1. Associated companies – mainly generated by the targeting of investors in film partnerships.
2. Capital allowance claims – analysis and rates claimed.
3. Provisions.
4. Debtors, creditors and accruals– when looking at this remember to consider the transfer pricing regime on inter-company balances.
5. Analysis of expense items e.g. Legal and professional fees, repairs and entertaining (on the latter does the total in the accounts agree to that shown on forms P11d for example).
6. Stock – generally on valuation / provision issues.
7. Research & Development
   
   You can tell form the above list that some forethought and additional work up front can reduce the scope of the enquiry.
   

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