Tax Audits

FIRCA encourages people to work within the tax laws by carrying out audits. An audit is basically a check of tax and business records to make sure you've paid the correct amount of tax. An audit can cover income tax, VAT, HTT, 15% provisional tax and PAYE audits (integrated audit).

About audits

The different types of audits we do how we select you for an audit and what it will involve.

What is an audit?

A tax audit is an examination of your financial affairs to check whether you have paid the correct amount of tax, and that you are complying with the tax laws.

Types of audits

PAYE Audits

This covers audits of Pay As You Earn deductions. It involves looking into areas such as payroll records and employee benefits.

How we select you for an audit

We may choose you for an audit for any one of the these reasons:

• selecting a particular industry.
• local knowledge, perhaps arising from media reports or unexplained wealth.
• information we get from other people about you.
• we may choose you randomly.
• information received in another audit, which suggests that your records should be checked.
• examining a particular issue or problem that affects a group of taxpayers.
• Analysing statistics and information avaliable internally and externally.

Disclosure during an audit

If you have already received a notice from FIRCA to say that you have been chosen for an audit it's still not late to make a voluntary disclosure.

You can tell us what's wrong with your (or your organisation's) tax affairs at the initial interview or at the inspection of records stage (whichever is earlier).

How long does an audit take?

There is no set time for an audit. How long it takes is affected by:

• the size and complexity of your business;
• the standard of your records, and
• your cooperation.

If we need to extend the audit timeframe we will tell you.

We know an audit can affect your business routine, so our auditors will try and cause little disruption as possible.

How are audits carried out?

Each type of audit is done differently, although the basic procedures are the same. Some audits may require one visit and some may involve more regular contact. This may include our auditors working on your premises.

Starting the audit

You can expect us to give reasonable notice of an audit in writing . Sometimes we will make an unannounced visit. If we do, we will show you our respective warrant cards and identification and you are required by law to let the auditor into your business premises. You are required to supply records (including private records or accounts) when requested.

Initial Interview

This is an opportunity for the auditor to meet you and discuss the audit in general.

Our auditor will ask you a number of questions relating to the records you keep, your accounting system and your business activities. Our auditor may also check your records and look at parts of your returns.

Audit

Checking records such as ledgers, journals, invoices, bank accounts (both business and private) is an important part of an audit and usually takes the most time.

Sometimes the auditor will need to take back your records back to our office to go thorough them fully. If we remove records we will give you a receipt detailing every item that we've taken. You can view these records and request copies if you need them.

If your business is quite large, we may check records at your premises.

Our auditor can contact third parties, including your suppliers and employees, for additional information.

They may also review your private activities during the audit.

Post audit interview

Our auditor will discuss with you the findings of the audit. A proposed discrepancy statement ascertained after the audit will be issued to you in writing. A time frame will be allowed to you to make further representation on the letter of proposed discrepancy. Please make use of this opportunity to meet the Auditor.

Mitigation

There might be other meetings during an audit to ask more questions and resolve any outstanding issues.

Finalising the audit

We usually arrange a meeting with you near the completion of the process to discuss the audit, cover any issues that haven't been resolved, and let you know about any discrepancies that arise out of the audit. During this meeting a Debt Management Unit (DMU) official will be also present. After discussing the final discrepancies arising out of the audit you will be required to meet the DMU officer to discuss how will you pay the outstanding taxes arising out of the audit. We will send you a final letter in all cases, whether or not an adjustment is made.

If you tax is being adjusted and no agreement is reached, or any other circumstances apply, we will issue you with an amended notice of assessment. This will explain the adjustments and the reason for them. If you do not agree you can dispute it but you must follow the objection process ( Practice Statement 6) to ensure your rights are protected if the matter goes to court.You are allowed under Section 16(1) of the Tax Administration Decree 2009 that you can object to the assessments raised after audit within 60 consecutive days of service of the notice of our decision.

How we will work with you?

Your rights (what you can expect from us) and what we require from you during an audit.

Confidentiality and privacy

Any information or records you give an auditor will remain confidential and be kept secure.

It will be used as disclosed only as required by law.

During the audit we may collect information about you. This will be gathered from interviews, discussions, correspondence, or from your records. We collect this information so we can assess your tax liability. You are required to answer all questions and provide any information we ask for. If you do not, you can be prosecuted and possibly fined.

The auditor's role

You can expect the auditor to:

• be prompt, courteous and professional.
• follow through on what they say they will do.
• respect your privacy and treat all information about you as private and confidential.

All auditors carry a warrant card showing their name and photograph, and stating their legal authority to check your records and enter you premises. You can ask to see this at any time, and we recommend that you do so before you give them any information.

Your role

You are to be courteous and honest and to give reasonable assistance during an audit.

This includes giving access to your business premises and supplying information and documents. We don't expect you to stop all activity and focus on the audit, but your cooperation will mean we can finish the audit as quickly as possible with minimal disruption to you.

Gifts

We cannot accept gifts from taxpayers. If you would like to acknowledge the work done by our auditors, you could send a letter of acknowledgement.

During the audit

If any of our auditor's questions are not clear to you, ask them to clarify the question so there is no misunderstanding. Most of the questions will be about your business, but some may be about your private activities. For example, you might be asked what you spend your money on, what bank accounts you have and what your leisure activities are. We ask these questions to check that you are living within the level of income that you have declared.

You can have someone with you at an interview, or at any other time during the audit. This might be your tax agent, solicitor or a friend. But you will need to provide documented authority (such as a signed letter) before an auditor can discuss your tax affairs with another person present.

The auditor will take notes of all interviews held during an audit. You are also welcome to take notes. We may also record the interviews – in some circumstances a recording may be a requirement, and in others, the auditor requires your consent. You may request a copy of any tape and a copy of the auditor's notes. We will also ask you to sign the notes as being correct, but you have the right to refuse.

If you have to collect any extra records or information, we will give you reasonable time to do this before continuing the audit.

Obstructing the auditor

It's a serious matter if you obstruct an Inland Revenue auditor or officer as they carry out their audit.

Obstruction can mean:

• refusing reasonable access to your business premises;
• destroying relevant information;
• lying and falsifying details;
• creating deliberate delays to frustrate Inland Revenue queries.

The auditor has the right to enter your private dwelling if they have a warrant card.

Obstructing FIRCA in carrying out its lawful duties, or exercising its lawful powers, is also an offense.

After an audit

After the audit we'll send you notices of assessment and statements showing if there is a refund or if there is tax to pay, and when it is due. The assessment will be issued after an agreed adjustment or notice of proposed discrepancy has been worked out. Should you fail to pay your debts by the due dates our Debt Management Service will instigate recovery action.