A special supplement to Tax Briefing draws together various strands of information on the ongoing Construction Industry investigation, and is the most-comprehensive document to date on any investigation launched by Revenue.

Perhaps the key point for accountants to bear in mind is that the investigation is based on the principles in the Audit Code of Practice. However, unlike other sectoral investigations, letters offering a period of “unprompted” self review are not issuing generally. The message would have to be that a voluntary review and disclosure are required to secure the maximum mitigation of penalties available under the Code of Practice – the entire sector is under increased risk of Revenue intervention.

It is also made clear that the investigation extends beyond the RCT issues traditionally most associated with the Construction Industry sector.

Site Visits

Disclosures made following an unannounced site visit by Revenue will still attract mitigation of penalties as unprompted qualifying disclosures, all other things being equal. This is an important clarification, which CCAB-I representatives at TALC Audit had sought from Revenue.

Foreign Sourced Employment Income

The Tax Briefing supplement adverts to the more general changes to the PAYE regime introduced in FA06 in regard to foreign sourced employment income. These are creating significant practical difficulties in practice, as arguably, how PAYE might operate had not been fully thought through in advance of the legislation being introduced (which was with effect from 1 January 2006). The article comments:

• Revenue recognises that the new regime in relation to the employments concerned may involve significant adjustments for the employers affected.
• Revenue will not seek to penalise any employer making best efforts to implement the new regime where, despite those best endeavours, there is delay in implementing the new regime.

Power to refuse a C2

Tax Briefing comments on the new provisions in FA06 which empower Revenue to refuse a C2 – “in respect of applications for C2s made on or after 2 February 2006 Revenue must have good reason to expect that the applicant will not only maintain proper business records in the future, but will also pay and remit tax and make returns on time.” So far, this is merely a paraphrase of TCA97 s531(11). The article does comment that past compliance will be one of the main factors when Revenue form a view on likely future compliance.

The article mentions the right of appeal to the Appeal Commissioners and the Courts, but given the costs involved, the delays that can be encountered with appeal cases, and the short term nature, by definition, of subcontractors’ work, it is unclear how useful the right of appeal might be.