The new Code of Practice for Revenue Audit was published at the end of last month and is now available on the Revenue website. The system is at its most efficient when the taxpayer does the heavy lifting. Both the old Code and the new Code operate on the basis that more the disclosure, and less the prompting by Revenue, the lesser the penalty.

The new Code incorporates legislative changes introduced in Finance (No.2) Act 2008 in relation to the civil penalty regime and to the criteria for publication of tax defaulters. It replaces the 2002 Code, the addendum to that Code, dated 11 March 2004 and the supplement to that Code dated 2 April 2009. Readers should note that the new Code will come into effect from 1 October 2010 for audits notified on or after that day. As regards audits, notice of which had been given, but which are not settled before 1 October 2010, the taxpayer may choose whether the settlement is made under the new Code or the old 2002 Code.

Chartered Accountants both in practice and in industry will find it useful that the new Code accommodates stage payments of arrears, and more straightforward settlements where tax default didn't result in a loss of money to the exchequer (e.g. no VAT paid but no input credit claimed). The new Code is also much better than its predecessor at specifying what kind of Revenue contact triggers the need to make a disclosure and the penalty mitigation available as a consequence.

Improvements were necessary, because the penalty appeal mechanism introduced since the last Code was formulated completely dilutes the non-publication incentive for making a disclosure to Revenue. Since 2002, Revenue powers have mushroomed and the introduction of mandatory electronic filing ensures that not only can a taxpayer be penalised for what they return, they can be penalised for the manner in which the return is made.

Despite having a new Code of Practice, any audit notification or Revenue enquiry is still unlikely to improve your day. Revenue raise far too many routine enquiries, and the Random Audit programme remains little more than a nuisance for compliant taxpayers.

A commentary on the operation of the new Code is contained in the Institute publication “Surviving Revenue Audits” which is available to purchase now.