Ignoring complex tax system leads to very serious consequences
The issue of tax obligations has come to the fore in recent days due to a high profile case of independent TD Mick Wallace. The tax system is complex at the best of times and can be fraught with pitfalls.
This article outlines in very general terms the types of obligations imposed on SMEs and the consequences for failing to observe those obligations.
Essentially, tax law imposes two separate and distinct obligations on taxpayers -- namely that of submitting one's tax return (income tax, VAT, corporation tax etc.,) and the payment of one's tax liabilities by the relevant specified dates.
In order to meet both obligations there is the separate requirement to maintain proper books and records for various time periods.
The table accompanying this article provides a useful summary of the key compliance deadlines for the main business taxes which are income tax (self-assessment and sole traders), VAT (sole traders, partnerships and companies within the VAT system), and corporation tax. The payment of payroll taxes is not covered by the table.
Of course, the above is only a summary of the compliance requirements of tax law.
There is a range of other penalties for failing to adhere to a range of obligations, including the failure to submit required documents, the failure to maintain proper books of account and for the required period, the failure to disclose a tax liability, and aiding and abetting the submission of incorrect or false returns.
Most flat penalties in VAT law are €4,000. There are also a range of Revenue offences which carry fines of up to €126,970 in certain circumstances and, or, imprisonment for up to five years for certain types of offences. They include being "knowingly concerned in the fraudulent evasion of tax" by another person.
This could extend to directors of limited companies and applies to all taxes. A director of a company that has committed an offence with the "consent or connivance of", or is attributable to any "recklessness" on the part of the director can be deemed guilty of the offence.
Also, while there are potentially very serious consequences for breaches of the tax code there are also serious consequences for company directors in company law such as the risk of being held personally liable under "fraudulent and reckless trading provisions". There is also a risk that such a director could be disqualified from acting as a director in the future where a Revenue debt is misused as working capital of the company.
Mark McCutcheon is a Chartered Tax Advisor. email@example.com