This week, we will discuss Revenue focus areas for clients in their Business Division. We’ll touch on who is in the business division, so you’ll know if you are in or out. Our main discussion is around Revenue activities in 2024. Many of the 2024 focus areas will continue into 2025. Let’s look at
- Revenue Business Division
- Share Schemes
- PAYE Modernisation
- Social Media Influencers
- VAT & RCT Returns
- Capital Losses & Reliefs
- Summary
Business Division
You are in Revenue’s business division if you have a trade or profession, and your turnover is less than €8.8 million. That will include sole traders, partnerships, and companies. Included are proprietary directors of companies in this division. A proprietary director is someone who owns 15% or more of the company.
The Business division has over 1 million customers. About 622,000 Form 11 Income Tax returns were filed for 2023. 76% of the returns filed and 78% of the payments made relate to cases dealt with by this division.
Share Schemes
105 cases are open concerning share schemes. 370 cases have closed generating €8 million for non-payment of Tax on Share Options. Revenue used the 2022 Tax return data to start the reviews. Once they finish the 2022 returns review the focus will switch to the 2023 Form 11’s
In these cases, Revenue issue Level 1 compliance letters. A Level 1 letter is the most favourable letter a taxpayer can get. It allows you to get your tax affairs in order and will have lower penalties than level 2. Plus, it gives you the option of making a full disclosure. Revenue confirmed that approximately 1,000 taxpayers have not replied so
“Revenue will escalate these cases”
The advice here is to engage as early as possible with Revenue. If you haven’t already done so, it’s time to get moving. Revenue know the shares you got so they have the information already. Your employer gives them information every year about share schemes for employees. This details what each employee gets. If you delay it will cost you more in increased penalties and more interest.
PAYE Modernisation
Compliance with PAYE modernisation is an ongoing issue for Revenue. In 2024 they conducted a Level 1 payroll compliance project examining issues like
- Late filers
- Incorrect use of Revenue Payroll Notifications [RPNs]
- Non-compliance with reporting dates, and
- Recurring errors
It confirmed that
“Business Division is identifying a continuing pattern of errors and significant slippage in PMOD compliance. PMOD will continue to be an area of focus in 2025, and fixed penalties will be applied in appropriate cases”
Enhanced Reporting Requirements [ERR]
Revenue introduced Enhanced Reporting Requirements in 2024 and all payroll operators should be well used to this by now. It focuses on the reporting of
- Travel & subsistence expenses
- Remote working daily allowance and
- Small benefit exemption
All payroll packages will now be able to deal with ERR and the reporting of these expenses. Revenue adopted a “working with you” approach to help employers in 2024. But it 2025 it will form part of PAYE reviews and audits. The penalties are high in this area at €4,000 per offence so you’ll need to get this right in 2025. Plus, 2024 will be still open to review.
A simple example here would be Christmas vouchers for staff. Under ERR rules you must inform Revenue of a gift of a voucher to each employee before giving the voucher. In our November payroll submission, we reported the value of the vouchers that we would give to our team. They received the vouchers in December. The key to meeting ERR rules is to inform Revenue on or before you give the benefit or pay the expense.
Social Media Influencers
Per Revenue, Social media influencers is a focus area with “significant undeclared income identified”
They even mention OnlyFans with the average earnings by Irish-based individuals at €32,500. And the highest undeclared income in excess of €2.8 million. Reminds me of the time when a mate sent me a WhatsApp Only Fans calendar at Christmas. Much to my disappointment, the calendar lived up to its name with a lovely picture of a hot or cold fan for each month!
Again, this is a case of Revenue knowing the income Irish individuals got from Only Fans. Because Only Fans confirmed the payments to Revenue. This applies to all gifts, free use of products like cars, and other value given to Influencers. This is Income and Revenue expect to get their share. It got a lot of media attention in 2024 and this will continue into 2025.
I understand that Revenue wrote to a lot of these individuals in the last year or so. Again, where people are not engaging you can be sure of follow-up correspondence. Only not as nice a letter as the first one!
VAT & RCT Returns
VAT & RCT Returns have a few paragraphs under the heading Data Quality & Interventions. Revenue have an issue with the quality of the data in returns. Errors with postponed accounting entries in the VAT 3 returns persist. As a result, Revenue removed the right to use postponed accounting in some cases.
With RCT “the accuracy of RCT returns is concerning to Revenue.” Issues identified include
- Incorrect Data
- Unknown subcontractors
- Post-payment notifications
Per Revenue, incorrect data is driving the selection of interventions. They mention considerable non-compliance with RCT and non-engagement following contact from Revenue. And they issue a word of warning
“The Division will ramp up the use of penalties and escalate cases to deal with non-responders”
Capital Losses & Reliefs
These are losses for Capital Gains Tax [CGT] and reliefs for CGT and gift/inheritance tax. The issue for Revenue is the lack of supporting documentation to back up a loss or relief claim. They mention
- Capital reliefs
- Capital losses carried forward
- Connected party losses and
- Restricted losses
The majority of the cases is a lack of supporting documentation relating to losses. The accountant claims the loss forward against the current year’s gain. The current year’s gain, as reduced, leads to a much lower CGT liability and payment.
This shows the importance of retaining important documents like purchase and sales contracts. You can’t assume your solicitor has these documents as they could have a policy of shredding old documents. Especially after the required time to hold them has passed. At least Revenue are adopting a helpful approach
“Revenue will adopt a common-sense approach if information is available. And the taxpayer is making their absolute best efforts to supply the information sought which may not be fully complete due to the passage of time”
Summary
The above gives a flavour of Revenue focus areas for 2024 which will continue into 2025. Reading between the lines Revenue hates non-responders, non-filers, and general non-compliance. It all comes down to poor-quality bookkeeping, incorrect returns, and no returns. No returns equal no tax and it’s their job to collect the taxes that you owe them.
They have the information and while acting the ostrich and burying your head in the sand is an option, it may not be the best one! What can you do? Firstly, to reduce Revenue interaction you can get your bookkeeping right. Imagine what life would be like if you had a quality bookkeeping process in place. VAT, PAYE, and RCT returns right and on time, every time. Getting the foundations right is an investment in your business and you. Get on the cloud, go paperless, and get a quality team behind you that loves getting this stuff right for clients.
Do you want to get things right in 2025 and beyond? If so, start here
