Revenue audit appeals

Revenue audit appeals

As Revenue audits of R&D tax credit claims have become more commonplace, instances of appeals to the Appeal Commissioner have also increased.

Instances of appeals to the Appeal Commissioner have increased.

As Revenue audits of R&D tax credit claims have become more commonplace, instances of appeals to the Appeal Commissioner have also increased.

Once a Revenue audit process has neared completion, the Revenue Inspector and the external scientific/technical expert (if appointed) may be of the opinion that some of the costs claimed by the taxpayer were not incurred in the carrying on of qualifying R&D activity, and therefore should be disallowed. The taxpayer is generally given the opportunity to provide further evidence and rationale before a final opinion is given by Revenue or their appointed expert. If Revenue is still not satisfied that the claim meets the science and/or accounting test criteria, they may issue an assessment to raise additional tax or reduce the payable credit upon conclusion of the audit.

If the taxpayer disagrees with the outcome of the Revenue audit, they are entitled to lodge an appeal against Revenue’s assessment to the Appeal Commissioner. The taxpayer must generally lodge a formal appeal against the assessment within 30 days of the date of issue, giving notice to the Inspector of Tax in writing. The case is first referred to the Appeal Commissioner, before potentially being heard in the superior courts (i.e. Circuit Court or High Court).

If the taxpayer is dissatisfied with Revenue’s handling of a case, they can seek to have the matter reviewed through Revenue’s Complaint and Review Procedures; KPMG can assist with this process.

Revenue and the R&D tax credit

Revenue’s obligation is to administer the R&D tax credit regime and to apply the relevant legislation to taxpayers’ claims. In so doing, Revenue applies its Research & Development Tax Credit Guidelines, which is based on the relevant legislation. However, it should be borne in mind that Revenue’s Guidelines are only an interpretation of the legislation and are not, in themselves, legally binding – a taxpayer may disagree with Revenue’s interpretation. In the case of a disagreement, it is ultimately a matter for the courts to decide on the final interpretation of the law.

Appeal support service

KPMG’s R&D Incentives Practice provides a dedicated R&D tax credit appeal support service. Working with specialist tax law solicitors and barristers with specific experience of R&D tax credit cases, our team of chartered accountants, tax advisors and engineers review the specific facts and situation of each claim and assist our clients in developing an appropriate strategy to defend an R&D tax credit claim before the Appeal Commissioner.

FAQ

What can I do if I disagree with Revenue’s assessment to raise additional tax / reduce the payable credit following an audit of an R&D tax credit claim? 

When a taxpayer receives an assessment to raise additional tax / reduce the payable credit from Revenue, they generally have 30 days to lodge a formal appeal against the assessment. This appeal must be made in writing (‘letter of appeal’) to the Inspector of Taxes. The 30 day limit may be extended to 12 months in limited circumstances.

How can I prepare for taking a case before the Appeal Commissioner?

The complexity of the appeal process means you will need to determine the best course of action to take in your case on procedural, tax and scientific grounds. KPMG’s team can assist you in meeting your procedural obligations on a timely basis, in framing your case and identifying its strengths and weaknesses in both legislative and scientific terms, and in working with your team to develop an appropriate strategy for presenting your case – whether in written or oral form.

What information must be submitted when filing an appeal? 

The taxpayer must submit the letter of appeal and Form AH1 (notification of appeal); additional documentation is not required to support the appeal application. The Form AH1 requires the taxpayer to outline the legislation involved, the grounds for appeal and the points at issue. However, a detailed submission outlining the particulars of the appeal, including the basis of the appeal, may be required in advance of the Appeal Commissioner’s hearing.

Are there any differences between the R&D appeal process and other tax appeal processes? 

Unlike other tax matters, there may or may not be the need for a scientific expert to appear before the court. KPMG can arrange for a relevant technical expert to review the scientific / technological basis of the R&D tax credit claim and testify before the Appeal Commissioner on the taxpayers’ behalf.

Can a settlement with Revenue be reached prior to the appeal?

Yes, it is possible for a taxpayer and Revenue to reach an agreement without having an appeal hearing. Where appropriate, KPMG can liaise between the taxpayer and Revenue to agree a satisfactory conclusion for all parties.

What options are available to the taxpayer if the Appeal Commissioner rules in favour of Revenue?

If the taxpayer disagrees with the Appeal Commissioner’s determination, they can appeal the decision to the superior courts. This case can either be reheard before the Circuit Court or referred to the High Court on a point of law.

What are the potential implications of an R&D tax credit appeal? 

When a case is heard by an Appeal Commissioner or the courts there is no guarantee of success. The process can be lengthy and costly, particularly if the case progresses to the higher courts.

Are the appeal and the outcome confidential?

The determinations of the Appeal Commissioner are not published. The rehearing of the case in the Circuit Court is held in camera; current practice is not to publish determinations. Cases that progress to the High Court will be heard in public and the judgment will be published and made available to the public.

What are the required time limits when taking an appeal against a Revenue determination? 

Appeal Commissioner

  • Taxpayer’s appeal must be made in writing (‘letter of appeal’) to the Inspector of Tax within 30 days of the revised Notice of Assessment. 
  • Once an appeal is lodged, Revenue must ensure it is listed for hearing; this is done on Form AH1. There is no time limit in which Revenue must secure a hearing date.

Circuit Court

  • Taxpayer’s application for a re-hearing of the appeal must be made within 10 days of the Appeal Commissioner’s decision. 
  • Revenue cannot apply to the Circuit Court for a re-hearing of the appeal.

High Court

  • Both the Taxpayer and Revenue can apply to the High Court to appeal either the Appeal Commissioner’s decision or the Circuit Court’s decision. 
  • The application must be made within 21 days of the relevant judgement. 
  • Appeals to the High Court must be made on the grounds of a point of law.

Court of Appeal

  • Both the Taxpayer and Revenue can apply to the Court of Appeal to appeal the High Court’s decision. 
  • The application must be made within 21 days of the High Court’s judgement. 
  • Court of Appeal must be made on the grounds of a point of law.

Further information

R&D Tax Credit Before the Appeal Commissioners (Irish Tax Review, June 2015)

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