Munster’s first independent VAT consultancy practice providing specialist VAT and Indirect tax advisory, assurance and interim management support services to owner managed businesses, small & medium enterprises, accountants and legal practices.

The “Aspect” Review, Revenue signals a new approach to audits

Tuesday, May 25, 2010

by Nick Ryan

News on the grapevine is that Revenue have adopted a new approach in undertaking VAT and Customs audits. The Revenue audit as we know may well have changed forever leading greater emphasis on businesses to control their compliance obligations and providing for that greater threat of higher penalties where errors are identified.
We understand that Revenue teams have been established with a mix of both VAT and Customs experienced officers. Revenue are researching industry types in order to identify “aspects” in that industry which might result in compliance weaknesses in VAT and Customs. These findings are then passed to the Aspect Review teams to be applied to individual businesses to determine if there are any signs of these aspects within that business. For instance, for wholesalers, VIES and Intrastat reporting can evidence imports of goods which have not been declared by the business and could equate to underdeclarations of sales. Where an aspect is identified within a business then an audit is triggered.
A key issue that has resulted from this is that Revenue’s diligence in reviewing repayment returns prior to approval of the repayment has diminished. By lessening these reviews there is a greter risk for businesses, especially start ups, sole traders and partenrships, where management demands of all functions is high, to duplicate simple errors from the first VAT return in further VAT returns which, if not identifed from a repayment review, may result in a significant VAT cost to the business in the long term.
The Aspect review places further impetus of the management and control of the taxes with the business and, in these times where cost control is key and where controls can often slip as a result of this and other cost control measures then there is a stronger likelihood that errors may occur. With the lessening of control by Revenue then where errors are found, the potential for higher penalties will be more evident.
If you have experienced an Aspect review or have just been notified of a Revenue Audt we would be interested to know in order to monitor the situation and gain more insight into Revenue’s approach. Please provide your comments below.