Business Personal Finance

Wednesday 27 August 2014

Crackdown on tax-free expenses nets €9.3m in penalties

Charlie Weston

Published 14/06/2014 | 02:30

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Tax officials have found hundreds of professionals who set themselves up as contractors even though they only work for one employer and have no staff
Tax officials have found hundreds of professionals who set themselves up as contractors even though they only work for one employer and have no staff

A crackdown on professionals claiming tax-free expenses they are not entitled to has yielded millions of euro in back tax, penalties and interest for Revenue.

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Tax officials have found hundreds of professionals who set themselves up as contractors even though they only work for one employer and have no staff.

These self-employed engineers, scientists and software specialists made themselves directors of companies, but they just have one client and had been claiming tax-free expenses for travelling to work, something they were not entitled to. They were also claiming other expenses that amounted to more than 20pc of their turnover.

Revenue said it uncovered cases where the mother of the professional was named as an employee even though she did not work for the company. All "payments" to the mother went to the company owner.

One company held its annual general meeting in the Algarve, Portugal, even though the company has no business activity there.

Revenue found that a company director claimed for travel expenses when abroad on honeymoon. Another company had named the family childminder as an employee, despite the childminder having no role in the company.

Finance Minister Michael Noonan said in a Dail reply that the level of expenses reimbursed tax free "was found to be excessive and several cases included expenses which had not been incurred at all or were personal rather than business related".

Now Revenue has audited 385 firms suspected of tax avoidance, and found 299 owe extra tax. Some 49 company directors have made settlements.

A total of €9.3m has been paid in taxes, penalties and interest on unpaid tax to date.

And accountants have been warned about advising clients about claiming tax-free expenses the company directors are not entitled to claim.

Another 368 companies are being audited, Mr Noonan told Fianna Fail's Michael McGrath.

A spokeswoman for Revenue said its audits of companies had thrown up a large number of dubious claims.

Mr McGrath said: "In many instances contractors will have acted on professional advice and the people who provided that advice had serious questions to answer."

Probes

He added that the startling figures meant any self-employed contractor providing services through a company under contract to a third-party client would be well advised to have their tax situation independently checked. This is to ensure they are not building up a massive bill of underpaid tax.

Revenue warned that it would use the expertise it has gained from this latest audit to broaden out future probes.

"Revenue will examine the impact of emerging practices in other areas, for example, in the use of contractors operating abroad, to ensure that they pose no risks of loss to the exchequer," the spokeswoman said.

Irish Independent

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