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Self-employed contractors are underpaying millions in tax

Audits carried out in the last year showed that the Revenue was underpaid to the tune of €9.3 million.

Michael Noonan
Michael Noonan
Image: Laura Hutton/Photocall Ireland

SELF-EMPLOYED CONTRACTORS have underpaid €9.3 million in tax.

Of the 385 company audits completed by Revenue since July 2013, additional liability was found in 299 cases (77.6%), while a further 49 directors of contractor companies also agreed settlements.  

Speaking in the Dáil on Wednesday, Finance Minister Michael Noonan said that additional tax of €5,969,630 had been identified, with penalties of €1,765,995 (30%), and interest of €1,639,623.  

He said that a further 368 companies remain under audit.

“Most of the audits now open indicated their intention to make a disclosure to Revenue some months ago and availed of a concession whereby Revenue agreed to allow additional time and to provide guidance in compiling disclosures,” Noonan stated.

Revenue has now written to those taxpayers advising that the process of preparing disclosures must be completed urgently if the benefits of voluntary disclosure (which encompass lesser penalty and non-publication provided certain specific conditions are met) are to be preserved. 

The contract companies audited covered a range of sectors including IT, administration and support. They provide services under contract to third-party clients. 

‘Staggering’

Fianna Fáil spokesperson Michael McGrath said that the amount of money owed was “staggering” he noted that many of the contractors were acting on “professional advice” from accountants.

“The people who provided that advice have very serious questions to answer.”

In light of these startling figures, any self-employed contractor providing services through a company under contract to a third party client would be well advised to have their tax situation independently checked to ensure they are not building up a massive bill of underpaid tax and punitive interest and penalties.

A pilot contractors audit project was operated in Revenue’s South West Region in 2012 and 2013 found that 89.9% - 107 out of 119 - of the companies checked had underpaid taxes. A further 24 directors agreed settlements. 

The total additional tax liability in these cases was €2,801,977.  Penalties of €906,433 (32%) and interest of €857,216 were imposed.  

Noonan said that these findings made it “clear that there was a pattern of behaviour which warranted a national audit project.”

Read: Revenue collected €23 million from tax defaulters in the first three months of 2014

Read: TD warns that Apple tax probe could result in job losses 

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