Revenue publishes Co-Operative Compliance Framework Review

Review findings

The outcome of Revenue’s review is largely positive and highlights the benefits for groups within the programme. Revenue concludes that:

• CCF is operated in line with the principles of the 2017 relaunch;
• the role of the dedicated Case Manager is crucial to the success of CCF;
• the value and importance of the Annual Risk Review (ARR) meeting is also crucial;
• CCF is being administered consistently across LCD; and
• CCF is contributing to improved voluntary compliance among participants.

A profile of CCF participants

The report provides useful insights into the profile of CCF participants:

• 123 groups, or 27.8% of eligible groups, participate in CCF.
• LCD branches with the highest participation rates are the three Financial Services branches followed by Motor, Oils & Transport and Natural Resources, Food & Leisure.
• Of the top 100 groups in LCD by turnover in 2020, 46% are in CCF. The participation rate declines with the scale of turnover.
• Most CCF groups have a dedicated tax team in Ireland. This is not a precursor to participation, as 40% do not have a local team.

What benefits do companies experience?

When we consider the results of the Revenue survey, we see that:

• all participants agree that Revenue better understands their business and that the CCF relationship is beneficial to their engagement with Revenue;
• the majority agree that CCF provides greater certainty on tax exposure; and
• participants largely agree that having access to a Case Manager provides benefits, such as faster responses to general queries and a contact to expedite matters dealt with by other Revenue branches.

While the survey results show that 68% of participants believe that significant time and resources are spent on the ARR meeting, the feedback indicates that these groups reap rewards from that investment.

Compliance interventions

The review finds that CCF groups are far less likely to be subject to a Revenue compliance intervention and, if they are, these interventions take a fraction of the time to resolve. This demonstrates that CCF participants save significant time and costs by avoiding lengthy audits and other compliance interventions. During the review period from 2017 to 2021:

• no audits were initiated on CCF groups. This is in line with one of the stated benefits of CCF, which provides that participants will only be subject to audits in exceptional circumstances;
• when CCF was relaunched, Revenue stated that transfer pricing (TP) might be one of those exceptions where a CCF group is audited. The report states that  Revenue did not carry out any TP audits of CCF groups, although two non-audit TP interventions were carried out; and
• the report finds that interventions are more streamlined for CCF participants. The report provides the example of a non-CCF group subjected to corporation tax audits on five companies, which took three years to reach settlement. In the two examples of interventions on CCF participants, these were resolved, on average, within four months.

Compliance yield

Revenue also shares statistics on the compliance yield arising from interventions on CCF groups versus non-CCF groups:

• Total tax yield from interventions on CCF groups was €193.8m (including interest and penalties).
• Total yield from non-CCF groups was lower at €154.2m. 

This demonstrates that CCF groups are embracing the concepts of self-review and transparency.

While the compliance intervention yield may be higher for CCF entities, as these entities generally have a higher turnover and pay more tax, the results align with that profile.

Certainty

One of the objectives of CCF is to provide greater certainty to taxpayers. 85% of CCF participants surveyed found that an open communications channel with Revenue facilitates obtaining Revenue’s view in relation to specific tax-related matters.

In our experience, CCF helps taxpayers obtain clarity on routine matters. However, it can be more difficult to get timely clarity on more complex tax issues, particularly where input is required from Revenue Legislation Services. PwC provided this feedback to Revenue in our response to the survey.

Conclusion and recommendations

Revenue’s review concludes that there are high levels of satisfaction with the CCF among participants. Notwithstanding this positive feedback, the review highlights some areas for improvement and includes several recommendations:

• On joining LCD, Revenue should write to newly eligible groups to make them aware they are eligible to apply to join.
• Succession planning for Case Managers should be prioritised.
• Case Managers should be rotated every five years.
• A formal timeline should be implemented for issuing the ARR meeting agenda to allow taxpayers and agents time to prepare.
• Improvements should be made to the classification of CCF interventions on Revenue’s system.
• Queries or issues identified during the ARR, as part of self-reviews, should be fast-tracked for resolution.
• An awareness campaign targeted at tax agents should be launched.
• Where a group’s tax affairs and/or tax payments are relatively low, ARR meetings should be held less frequently (for example, every 18 months).
• There should be a formal procedure for removing groups from CCF where Revenue is of the view that the group is not fulfilling its obligations.

The four key actions to take now

For companies considering joining CCF, Revenue’s review should provide some useful insights into the practical operation of the programme.

Further, Revenue’s new Compliance Intervention Framework also increases the attractiveness of CCF. All compliance interventions for CCF participants will fall under Level 1 of the framework. This protects a company’s ability to self-correct and make unprompted disclosures (ensuring that they can avail of penalty mitigation and protection from publication). For non-CCF participants, Revenue interventions would most likely be in Level 2.

If you wish to join CCF, an application form must be completed in which you must confirm that the group satisfies the relevant entry criteria for CCF. Formal entry to CCF will only be granted where Revenue is satisfied that these conditions have been met.

We set out below some points to consider before submission of the application or in advance of the first ARR meeting.

1. Ensure that tax filings are up to-date

Groups entering CCF must have met all of their tax filing and payment obligations. Outstanding filings are the main reason for delays in the application process. It is recommended that the payment/filing position for each group entity for the past four years is reviewed. In particular, you should ensure that “secondary” filings such as Form 46Gs and VAT Return of Trading Details have all been submitted to Revenue.

2. Review settlements

In the main, groups are not entitled to join CCF where they are deemed to have a poor compliance history. A group is deemed to have a poor compliance history where they have been subject to a penalty of 15% or more in respect of a settlement made in the last three years. Where a recent settlement has been agreed with Revenue in respect of an issue(s), groups must provide confirmation to Revenue that new tax controls have been put in place to prevent future occurrences.

3. Formalise your Tax Controls Framework

Groups wishing to enter CCF must confirm that they have a Tax Controls Framework (TCF) in place. Evidence of the TCF doesn’t need to be provided to Revenue with the application form. The TCF is, however, discussed with Revenue at the annual CCF Risk Review meeting and, increasingly, Revenue are requesting that underlying TCF documentation is provided. It should not be necessary to have all elements of a TCF in place before submitting the application form. It is, however, strongly recommended that the development of a TCF is sufficiently progressed in advance of the first ARR.

4. Tax risks

In advance of entering CCF, it is important that groups are aware of their key tax risks. It is, therefore, important that groups undertake an exercise so that they have full visibility over potential tax exposures across all tax heads and consider the findings in the context of self-reviews, which they may be asked to undertake.

We are here to help you

Whether you already participate in CCF or are considering joining, PwC’s specialist Tax Risk & Controversy team can assist you. Our team, which includes ex-Revenue officials, has extensive experience in supporting companies through all aspects of the CCF process and managing tax risk. We can assist you in: evaluating the merits of joining CCF and navigating the application process; preparing for the ARR meeting; developing a TCF; carrying out self-reviews; and monitoring and testing tax controls. We are ready to help you navigate your CCF journey. Contact us today.