Advisors.ie

Last year we had a client who got a Revenue audit and the Revenue auditor decided that they had an issue with the unvouched expenses, these are expenses which by definition of the Revenue do not need receipts to be backed up.

The auditor knew that the owners of the business both had self employed spouses and on that basis gave the following ultimatum ‘either you pay €5,000 or we will audit the companies of both of your spouses’.

That is tax collection bullying at the coal face, the auditor in question didn’t feel the need to back that up with a precedent or anything beyond a ‘take it or leave it’ attitude. The client in question was left believing that they either pay what was effectively a ransom, or they would both have the companies their spouses worked for bogged down in a time consuming audit that would probably cost their companies just as much in lost output or more.

We regret not taking that case to court and we vowed not to let it happen again, we are no longer accepting what we believe to be bullying tactics used by the Revenue any longer, instead we will advise our clients to go to court and we will provide expert witness services for them where and when required.

So it is with great joy that we got our first win today.

A client of ours was being sued by the revenue over an income tax return going back to the year ended 5th April 2001. The tax assessment stated €17k Euro ( Almost £14k in IRL Punts) , but there were credits and payments taking the bill down to around €12k Euro.

The revenue sued for this, along with €10k interest and penalties, which made it €22k. They started issuing solicitors letters and proceedings back around late 2008/early 2009.

We only took on the client in 2009, but they were adamant that this liability did not exist, he showed me an assessment for that tax year from late 2005 showing the balance cleared.

The big problem was relating to RCTDC forms, more commonly known as C45’s. Our client sent in three original RCTDC forms to the revenue around 2005, which would have settled the €12k liability, but the revenue said that they did not have them (obviously got lost). Thankfully they kept copies of these forms.

We sent in a letter in July 2009 to the tax office with copies of the C45’s from year 2000 asking the revenue to use them to pay the liability. They refused to allow the copies stating that if we did not have the originals we needed a letter from the principal contractor stating that these were genuine true copies.

This was impossible as the principal had ceased trading, and even if the principal was still trading, how would they have records going back to  2000, you only need to keep them for six years! Meaning that we would be out by about 3 years on the records likely to exist in a company that had ceased trading!

After many meetings with the solicitors, barristers, letters back and forth, etc. the revenue changed their mind and decided to accept some of the copies of the C45’s, but not all of them, which did still leave him with a liability of around €3,800 Euro – similar to the first client – they were saying ‘just settle for X amount and we’ll leave you alone’.

We had a better idea – “how about you go and f”£k off”? At this stage the proceedings and court dates were practically set.

Our client was given two options: Walk away from this, have a zero liability on this tax year, and pay his own costs, or have his day in court, if he wins, most likely get his own costs paid, if  he loses, there would be large costs of c €20k to pay.

And this is the rub of it, the state has endless resources with which to put their case to trail, a small business owner has only their own, and they have to fund it from cash-flow unlike the state who have the ability to tax it out of others.

(leading to my belief that whoever saw this go to court in the Revenue services should be fired – but you can’t fire them of course!)

Anyway, the case was this morning, and he won. The prosecution barrister did not even bring a Revenue official to the court, their barrister gave the judge an affidavit stating that they were looking for €22k, but said that they only now wanted €5k (€3,800 mentioned above plus around €1200 in costs).

The judge pretty much tore strips into the barrister for the Revenue, firstly for not getting a fresh affidavit signed and sworn showing that they were now looking for €5k, and secondly, why was the document not signed by Gerard Harrahill (the main man in the Revenue commissioners), the barrister said that he did not feel that a new affidavit had to be signed again, the Judge disagreed.

She also asked why nobody from the Revenue had even bothered to come to court, she was very happy with our side and noted that not only is the client here, but the client’s accountant came along as well.
Have to say, the barrister for Revenue got shot down pretty badly, he even quoted case law as a precedent and she completely disagreed with that as well.

The case was struck out, the judge ordered that all costs for today are paid for by the other side, and she even mentioned our firms costs.

The barrister for our clients side said that their statement was incorrect, and felt that the client did not even owe €3,800 Euro, stating that when all C45’s are included that the client is actually owed money.
She instructed us all to have a meeting over this, and agree on the final balance due back to the client.

Now, there is still an outside chance that the revenue could take us back to court, but both our clients solicitor and barrister said that their chances of overturning this are zero, they will just accept our figure for his final tax bill (refund) and any costs also.

Our client always felt they were in the right, had he thought for a second that he was in the wrong, he would have just paid. The important lesson in this is to remember when you are right that you shouldn’t roll over just because its the ‘easy’ or ‘less painful’ option, because in doing so you only ensure that strong arming will continue with the next person who is there to be pushed around.

We say this as distinct from tax evaders who should be punished, if Revenue ever decide to lean heavily on you and you know you are not in the wrong then call us, we are ready to face up to them always and anywhere. And don’t forget to be angry, because the cost of all of this is being paid by you.