Don’t Let an Inland Revenue Audit Get Out of Hand
Often we are asked to assist clients and other accountant’s when dealing with Inland Revenue risk reviews and audits. Commonly, by the time we are asked to assist, it is too late to do anything other than damage control. This is because the client has missed the opportunity to conclude the audit a lot earlier and Inland Revenue has gotten frustrated with a lack of progress.
In the last few months we have assisted on a number of what we would call ‘degenerated’ audits, that is audits which are starting to age significantly, both sides cannot agree and are either in dispute or a heading that way or worse and Inland Revenue is considering prosecution.
Concluding an audit early has a lot of benefits, including reduced interest and penalties, less accounting and advisory fees, peace of mind and a reduction in tax shortfalls identified by Inland Revenue.
There are several strategies which can be employed to ensure that an Inland Revenue risk review or audit runs smoothly and ensures that Inland Revenue does not go on digging up dirt for ever.
Take specialist advice
We can’t emphasis this point enough. An accountant who regularly deals with Inland Revenue risk reviews and audits will be able to help you conclude the audit much sooner and with a far better outcome.
Make a voluntary disclosure
If you know that you have made a mistake or Inland Revenue has indicated that they hold information that shows that you have, do not miss your opportunity to make a voluntary disclosure.
Sometimes admitting that you got it wrong and taking a front foot approach is all that’s needed to stop Inland Revenue from progressing things further. In fact, Inland Revenue policy dictates that an auditor is precluded from investigating a particular tax shortfall if a full and complete voluntary disclosure is made.
Further, if you make a voluntary disclosure, any shortfall penalties that may apply will be reduced significantly and in certain circumstance waived completely.
Provide as much information and explanation as you can
Inland Revenue really appreciates it when a taxpayer answers their questions clearly. The best way to stop Inland Revenue from looking deeper into your tax affairs is to give them what they request as quickly as possible.
Do not assume that Inland Revenue will automatically understand what you have given them. Break it down, make it easy for them to understand and give them the opportunity to do their job and conclude the audit.
Be prepared to settle rather than fight
Remember that Inland Revenue operates within a framework of policy and process. If they think they are right, they will continue on with the audit for as long as you want to fight them. They are assisted in this process by a team of legal advisors and a taxpayer dispute regime.
Sometimes it is best to try and settle the audit before you are locked into a dispute. Whilst it may mean that you concede, even if you do not think Inland Revenue’s position is justified, ultimately it will save you time and money and allow you to conclude the audit before Inland Revenue has had a chance to uncover every possible adjustment.
No matter what stage your audit is at, we can help you get the best possible outcome due to our working knowledge of Inland Revenue policy and processes.
Contact us for a no obligation discussion about your situation.