Tax probe uncovers doctors using firms to pay nanny expenses
Doctors paid their nannies through their companies and in one case a child was paid to work on a website in breach of tax rules, Revenue officers found.
A Revenue probe into hundreds of companies linked to medical consultants has yielded €61m in tax, interest and penalties so far, the Public Accounts Committee (Pac) has heard.
Improper practices uncovered include using the firms for personal expenses such as paying nannies and other household costs.
Revenue Commissioners chairman Niall Cody said that in one case expenses were being used to pay a child for work on a website, because they were "proficient in IT and the consultant wasn't".
TDs heard that the probe into the tax affairs of consultants began in 2010 after a routine audit of a medical consultant as a high wealth individual.
Mr Cody said "certain risks" were identified and issues that Revenue began to challenge centred on the incorporation of a private practice to secure an overall reduction of tax.
While such arrangements can be legal, there were concerns about the nature of the transactions between the consultants and the companies, and the level of evidence available to support the commercial nature of these transactions.
Among the risks were claiming personal expenses against professional income and excessive or incorrect tax deductions claimed in relation to salaries of spouses and children.
Mr Cody said that as of April 30 this year Revenue has initiated 825 cases, 552 of which were closed by that date, yielding €61m in tax, interest and penalties. The figure includes 'future uplift', the estimated worth of tax that will be collected and the yield relates to 276 consultants, 36 of whom ended up on the tax defaulters list.
Fianna Fáil TD Marc MacSharry asked if Revenue has identified any tax advisers who devised the tax arrangements used by the medical consultants that made settlements.
Mr Cody said he couldn't give details of such tax practitioners. But he confirmed there was a scheme targeted at consultants and said in cases like this it can stem from tax advisers looking at practices in the UK and trying to apply them to Irish circumstances.
Mr Cody said that such schemes are constructed by professionals but then part of the problem is "some people tend to then… lump everything in to minimise the amount of tax."
He added: "The average settlement in these cases are considerably higher than the random settlements in our risk-based projects. These are people with significant incomes and there has been significant underpayment of their tax."
Mr Cody said: "It's back to this idea that if the scheme results in a significant reduction in their tax liability - if it's too good to be true, it's probably not proper."
He also said those involved in the early cases didn't avail of the opportunity for disclosure because they and their advisers felt the schemes were "unchallengeable".
He said he saw one letter from an agent that was a "comprehensive rebuttal" of Revenue's probe. "There was an element of 'imagine the cheek of ye to challenge the scheme' but what we do is that we follow these things through to the end," Mr Cody said.
Revenue's probe of the tax affairs of medical consultants has not yet concluded, with Mr Cody telling TDs that as of March there are 279 open cases, 84 of which are under appeal.