Coping with audit costs
How both businesses and auditors alike can manage the fees
How both businesses and auditors alike can manage the fees
When businesses are getting their tax return ready for the October 31st deadline, finding the funds to settle the cost is naturally a main concern. However, it may not be the last that a business will see of their 2017 tax affairs. If a company is selected for an audit, the real work may just be beginning.
According to the Revenue Commissioners’ 2016 Audit Report, 6,173 audits were completed, yielding €247.9 million and the yield from other compliance interventions was €307.7 million.
“Revenue audits happen for a reason,” says Richard Lombard, Director of Lombard Accountants. “For example, they could be dissatisfied with one of your returns or you could have incorrectly claimed something or simply that you have a pattern of filing your returns and paying your taxes late.”
Revenue operate a system called REAP, a computer database which logs all the information they hold on a business owner received directly from them or from third parties such as the Department of Social Protection. Other records they will have include Stamp Duty records, so outside of a company’s return of income, they have data about their purchases and sales of assets.
These records are matched up to the contents of the return of income. The fewer items that match properly, the higher the risk of being audited or investigated.
“The first thing businesses have to decide is whether they have enough time to review their tax affairs before the audit is due to commence,” says Lombard. “If the date and time selected for the audit are unsuitable, they may be able to rearrange this with the Revenue Commissioners.
“Being tax compliant is good business practice because it will save you money in the long term.”
Looking forward to the year ahead, one way that businesses can be more prepared for any unexpected costs is by making sure their tax affairs are in order well in advance and arranging a tax review with an accountancy practice.
FINANCING FEES
As fees for dealing with a Revenue audit can be a large expense for a business, having the option to spread the total cost over the course of the year can be beneficial. KBC offers assistance with this through its Professional Fee Finance. This allows customers to make lump-sum payments and spreads them over a longer period of 9, 10 or 11 months.
“We have relationships with accountants, who carry out work for customers from all sectors,” says Garrett O’Donohoe, Head of Business Banking at KBC. “The accountant needs to get paid, so we will pay that invoice and fee owed to the accountant and the customer will pay it back over the 9, 10 or 11-month period. Typically, by the time the accountant does an audit again the next year, the loan is paid off and if it is required in the subsequent year, they can re-apply for finance again.
“It’s all about trying to manage the businesses’ cash flow and not having big sums of money coming out of the business at any given time. This is important for any business.
“What people like about Professional Fee Finance, is that there is nothing complicated about it – it is a simple product which assists them greatly in managing their cash-flow. The main benefit for the accountancy practice is that the fee is paid in full quickly, which also benefits the Practice’s cash-flow.
“By recommending that an accountancy firm’s client uses an external fee finance provider, the client can manage their cash-flow and attribute appropriate funds monthly.
“KBC has been providing this product for many years and it always gets a great response. It’s good to get in early as everyone is busy in October and November, although we do provide this product year round. Accountants or their clients who want to start availing of this product can contact us.”