In recent times, we have seen a number of high-profile cases hitting the headlines regarding the actions taken by the Revenue Commissioners to recover taxes and customs due, and the prosecution of individuals involved in tax filing irregularities.
We have seen the Revenue use its quite considerable power of attachment. We have also seen it jailing individuals when their customs duties were under declared or when they made incorrect VAT returns.
These examples have highlighted the need for the careful consideration by all business owners in their engagements with the Revenue Commissioners.
For most typical business owners who are turning over in excess of €80,000 per annum and have at least one employee, they will be required to file VAT returns at a minimum every two months.
They will also have to file and pay a return of the PAYE (Pay As You Earn), PRSI (Pay Related Social Insurance) and USC (Universal Social Charge) due on foot of wage payments made to their employees at a minimum every month.
File and pay tax using ROS system
As most businesses are now required to file and pay their taxes online using the ROS (Revenue Online Service) system, the general deadline for these returns is the 23rd day of each month for the payroll taxes and the 23rd of every second month for VAT.
Once these basic file and payment deadlines for the fiduciary taxes (VAT and payroll taxes) are being met then business owners can expect no particular attention from the Revenue Commissioners. The compliant business owner is far less likely to be selected for audit than an owner where their compliance record is far from exemplary.
Once the business owner fails to either file or pay or even both by the due dates then the Revenue’s eyebrows gets arched. The Revenue’s stated policy of achieving high levels of voluntary compliance is supported by taking the appropriate action against non-compliance.
Revenue tools to pursue non-compliant business owners
The Revenue has a number of tools they can use in the pursuit of non compliant business owners. They include the following in order of most frequency used:
The Revenue can refer the outstanding tax liability to one of 16 local sheriffs (Section 960L Taxes Consolidation Act 1997). A local sheriff will seek to collect the debt through a series of measures, including the seizure of goods and assets.
2. Referral to a legal firm for court action
(Section 960I Taxes Consolidation Act 1997.) The Revenue uses a number of legal firms to pursue tax payers through the courts for judgment orders.
3. Notice of Attachment
(Section 1002 Taxes Consolidation Act 1997.) This is where the Revenue seeks to have a third party who owes the business owner money and pays the Revenue directly. Typically this means the Revenue can “freeze” the bank accounts of the business and divert any funds available in those bank accounts to discharge the tax liability.
4. Winding up a business
(Section 215 Companies Act 1963.) The Revenue can, in some cases where a business trades as a limited company seek to have the High Court issue an order to wind up the business because it continues to trade and has significant tax or other debts.
The important thing for all business owners to note is that any of the above enforcement actions can take place very quickly.
In our experience, we have found that if a business owner misses the 23rd of the month file and pay deadline, within three weeks of that date a final seven day notice is issued to the business of the Revenue’s intention to invoke one of the enforcement actions.
So it is quite possible that within one month of the missed 23rd file and pay deadline, the sheriff could be calling to your business to seize goods and/or assets.
In this current economic and financial environment, the Revenue is keeping a close eye on the compliance deadlines and is proceeding very quickly indeed to enforcement action.
What to do if you encounter a problem with paying tax liabilities
While the Revenue is sympathetic to the plight of business owners these days, it is bound to make sure all taxes are collected on time and in full to ensure the maximum financial resources are available to the government.
The Revenue takes a very dim view of business owners using tax revenue as what it calls “an unauthorised source of credit”.
In the Revenue’s customer charter, it says it expects all tax payers “to provide true and correct information in all your contacts with Revenue and to advise Revenue in a timely manner of developments that are relevant to your tax and customs affairs”.
The Revenue actively encourages early and serious engagement in relation to tax payment difficulties.
My advice to business owners who find themselves in tax difficulties is as follows:
- Be aware of the file and pay tax deadlines for each tax
- Do not ignore any correspondence from the Revenue
- Consult with your accountant or tax adviser as early as possible and if necessary seek appropriate specialist professional advice (legal, insolvency)
- Contact and engage with your local tax office
- Negotiate a realistic payment plan and stick to it
The key here is that where a business finds itself in financial difficulty and is unable to meet its tax payments, it should seek to face up to this problem early, take appropriate advice and avoid ending up like some of the recent headline situations or on the quarterly tax defaulters list.
Editor’s note: This post was originally published in July 2012 and has been updated for accuracy and relevance.