eBrief No. 23/09 advises that Guidelines have issued on the New Penalties Regime which was introduced by Finance (No. 2) Act 2008. The Guidelines outline the changes and explains their effect on the Code of Practice for Revenue Auditors (2002).

Revenue, in consultation with the Practitioner Bodies including ICAI through TALC, are working on a new Code of Practice for Revenue Auditors to supersede the 2002 Code. The Guidelines that have issued are seen as a form of bridging document – between the 2002 Code and the new Penalty Regime introduced in F(No.2)A08.

A key statement in the Guidelines is the reassurance from Revenue that nothing in the new legislation prevents the continued availability of existing procedures under the Code of Practice for Revenue Auditors (2002) concerning self-correction, innocent error, no loss of revenue, interest charge, surcharge, materiality, etc.

According to the Guidelines, the majority of chapters and sections in the Code of Practice for Revenue Auditors (2002) are still relevant in the context of a Revenue audit. The following sections were specifically noted in the Guidelines:

• Surcharge for Late Submission of Returns is as set out in paragraph 8.1 on page 23
• Innocent Error – Adjustments Without Penalty is as defined in paragraph 9.6 on page 29
• Co-operation is as defined in paragraph 9.7 on page 30
• The period to prepare a qualifying disclosure, the Statement of Disclosure and Examination of Disclosures are as set out in paragraphs 10.1.3, 10.1.4 and 10.2 on pages 32-33
• Self-correction is as defined in paragraph 10.5 on page 35
• VAT: “No Loss of Revenue” is as outlined in paragraph 11.1 on page 36
• Procedures for Discharging Liabilities and Inability to Pay Situations are as per paragraphs 13.1 and 13.2 on pages 40–41
• Paragraph 9.4: The net tax-geared penalty will be treated as including any fixed amount due under Section 1053(1), Section 1054(3)(a), TCA 1997 and Section 27 VAT Act or any similar provision
• Paragraph 10.3 – benefits of a Qualifying Disclosure and Non-Prosecution

The key change in the audit process is in relation to the determination of a liability to penalties.

With effect from 24 December 2008, where there is –

• no agreement on the liability to a penalty; or
• where an agreed penalty is not paid,

the following procedure (taken from the Guidelines) will apply to all existing ‘open’ or ‘unsettled’ audits and to all new audits (irrespective of which tax year the audit refers or when the tax default occurred):

Step 1: Based on the evidence available, a Revenue officer may form an opinion that a taxpayer is liable to a penalty.

Step 2: If the penalty is to be pursued, a Notice of Opinion must issue to the taxpayer (and a copy should be sent to the taxpayer's agent).

If the taxpayer agrees with the opinion of the Revenue officer and pays the penalty, then that is the end of the matter.

Step 3: If there is no agreement on the amount of the penalty or no payment of an agreed penalty (or no response from the taxpayer) within 30 days, the Revenue officer may make an application to a relevant court for that court to determine that the taxpayer has contravened a relevant statute giving rise to a penalty;

Step 4: Where a court makes a determination that the taxpayer is liable to a penalty and makes an order for the recovery of that penalty, Revenue may collect and recover the amount in like manner as the collection of tax.

eBrief No. 23/09, which contains a link to the Guidelines, is available at http://www.revenue.ie/en/practitioner/ebrief/2009/no-232009.html. The Guidelines are reproduced at Section 2.04.