The letter arrives with the Revenue logo in the top corner. It informs you that your business has been selected for a Revenue audit covering income tax, corporation tax, VAT, or some combination of these, for a specified period. You have a defined number of days to respond.
This is not the moment to panic. It is the moment to act - specifically, to get professional representation in place before you do anything else.
I have been representing businesses through Revenue audits for over 35 years. The businesses that come out of audits in the best position are the ones that engage a professional immediately, prepare thoroughly, and do not try to handle the process on their own. This article explains what you are facing and what the process looks like from beginning to end.
What a Revenue Audit Actually Is
A Revenue audit is a formal examination of your tax affairs for a specified period. Revenue reviews your books, records, and returns to verify that you have correctly declared your income and expenses, paid the right amount of tax, and complied with your filing obligations.
It is not a criminal investigation. The vast majority of Revenue audits are civil processes that result in a settlement - additional tax, interest, and penalties - rather than prosecution. The threshold for criminal prosecution is reserved for cases involving deliberate fraud at a significant scale. For most businesses that find themselves under audit, the process results in a monetary settlement and a commitment to improved compliance going forward.
That said, the settlement amounts can be significant - and the penalty rate applied can vary enormously depending on how you handle the process.
Why Was Your Business Selected?
Revenue operates a risk-based compliance system called the Revenue Compliance Programme. Businesses are selected for audit through a combination of:
Profiling and risk scoring. Revenue’s systems analyse your filed returns against industry benchmarks, cross-reference figures across different tax heads, and flag statistical outliers. A gross margin that is significantly below the industry average, a VAT return that does not align with your corporation tax return, or expenses that appear disproportionate to turnover will attract attention.
Third-party information. Revenue receives data from many sources - banks, other government departments, property registrations, company filings, EU information exchange frameworks (including the DAC series covering crypto and financial accounts). If Revenue has information about income or transactions that does not appear in your returns, that discrepancy is a trigger.
Random selection. A proportion of audits are random - not triggered by any specific risk indicator. These are a general deterrent and a way of gathering compliance intelligence across the economy.
Follow-on from related parties. If Revenue audits a company and finds issues, they may audit connected parties - related companies, directors, significant shareholders, or suppliers.
Knowing why you were selected can help frame the audit response. An audit triggered by a specific profiling flag is likely to focus on that area. A random audit is typically broader. For more on how Revenue’s selection process works, see our guide on how Revenue selects businesses for audit.
The Notification Letter: What to Do Immediately
The audit notification letter sets out the tax head(s) under review, the period covered, and a deadline for you to advise Revenue whether you wish to make a qualifying voluntary disclosure before the audit begins.
This last point is important. Even after receiving an audit notification, you have a window within which you can make a disclosure of additional liability. This is called a “prompted voluntary disclosure” and it attracts lower penalty rates than liabilities discovered by Revenue themselves during the audit. The window is typically 14 days from the notification date.
The first thing to do: contact your accountant or tax advisor. Do not respond to Revenue, do not send any documentation, and do not have any phone conversations with Revenue until you have professional advice. Anything you say or send can affect how the audit proceeds. If you have received a letter and are unsure what type of contact it is, read our guide on what to do when you receive a letter from Revenue.
What Revenue Will Ask For
Once the audit begins, Revenue will request records. The specific records depend on the tax head under review, but for a typical business audit covering income tax/corporation tax and VAT, expect requests for:
Books of account - the full accounting records for the period, including the nominal ledger, purchase ledger, sales ledger, and cash book.
Bank statements - for all business bank accounts for the full audit period. Revenue will cross-reference lodgements against declared income.
Sales invoices and records - all sales invoices, receipts, or equivalent documentation. For retail businesses, till rolls and daily summaries.
Purchase invoices and expense receipts - supporting documentation for all claimed expenses.
VAT records - the VAT account, all VAT returns filed, and the underlying documentation.
Payroll records - PAYE records for all employees, including payslips, employer returns, and benefit-in-kind records.
Revenue may also ask for information about specific transactions - a particular expense that appears large or unusual, a property transaction, a director’s loan account, or assets held in the business.
The Examination Process
A Revenue auditor - typically a Revenue officer assigned to your district - will examine the records you provide. They are looking for:
Income that was not declared. Expenses that were claimed but were not genuinely business expenses. VAT that was not properly accounted for. PAYE that was not correctly deducted or remitted. Benefit-in-kind that was not declared.
For most businesses that have been filing in good faith, the audit examination may identify only minor discrepancies - a misclassified expense, a VAT error in one period, a benefit-in-kind that was overlooked. These result in modest settlements.
Where there are more significant issues - unreported income, systematic expense misclassification, PAYE non-compliance - the examination will go deeper and the settlement will be more substantial.
The Audit Settlement
At the conclusion of the examination, Revenue will issue a settlement computation. This sets out:
The additional tax due - the tax that should have been paid but was not. Interest - Revenue charges interest at 8% per annum (approximately 0.0219% per day) on unpaid tax, running from the date the tax should have been paid. Penalties - the rate depends on the category of behaviour and the degree of cooperation.
The penalty structure has three main tiers:
Prompted voluntary disclosure (after notification, before audit examination). Penalties of 10% of the tax for deliberate behaviour, nil to 3% for careless behaviour.
Unprompted voluntary disclosure (before any Revenue contact). Penalty rates are lower still - often nil for careless errors and a minimum rate for deliberate understatement. Learn more in our guide to voluntary disclosures.
Audit settlement without prior disclosure. Penalty rates of up to 100% of the tax for deliberate behaviour, up to 40% for careless behaviour.
The difference in penalty rates between a voluntary disclosure before audit and a liability discovered during audit can be the difference between paying no penalty and paying a penalty equal to the full additional tax. On a significant liability, that is a very large amount of money.
What Professional Representation Does
When I represent a client through a Revenue audit, the process works as follows. I review the books and records first - before Revenue sees them. I identify any issues that exist, quantify the liability, and advise on whether a prompted voluntary disclosure should be made. I prepare all documentation in the format Revenue expects. I handle all written correspondence. I attend any meetings or interviews with Revenue alongside the client. I negotiate the settlement terms, including the penalty characterisation.
The practical effect of experienced professional representation is almost always a better outcome than self-representation - both in terms of the amount of the settlement and the efficiency of the process. Revenue audits are time-consuming and stressful for unrepresented taxpayers. With representation, the client’s involvement is minimised to providing records and signing off on the final settlement.
What Happens If You Ignore a Revenue Audit Notice
Do not ignore a Revenue audit notification. Revenue has the power to make estimated assessments if a taxpayer fails to cooperate with an audit. An estimated assessment is Revenue’s own calculation of your liability based on available information - and it will be set high. Appealing an estimated assessment is more difficult and more expensive than engaging with the audit process in the first place.
Persistent non-cooperation can also result in Revenue referring the case for prosecution rather than civil settlement. This is unusual, but the risk exists and there is no reason to run it. Understanding the difference between a Revenue audit, enquiry, and investigation can help you assess the seriousness of your situation.
The Final Message
If you have received a Revenue audit notification, call your accountant today. Not tomorrow. The window for a prompted voluntary disclosure is short, and every decision made in the first week of an audit has consequences for how it resolves.
Malone & Co. has been representing Dundalk businesses through Revenue audits for over 35 years. If you need help, we are here.
Paddy Malone FCA AITI
Paddy is the principal of Malone & Co. Chartered Accountants in Dundalk. A Fellow of Chartered Accountants Ireland and a Chartered Tax Consultant with the Irish Tax Institute, he has been advising businesses across County Louth and the North-East for over 35 years.