Revenue Powers - What to do when the Revenue arrive

This article was published in The Law Society Gazette in April 2004.

1. Introduction

You may think that you are unlikely to ever come into contact with the Revenues newly reorganised Investigations and Prosecutions Division, but in the current climate this is no longer a remote possibility. Julie Burke offers some advice.

How would you react if the Revenue were to write to you or arrive at your office and request client information, documents or files? Or worse, if they announced that they intended to conduct a search of your clients files?

What do you do if a client contacts you, saying that Revenue officials are at his home or business premises demanding access and seeking information?

When the Revenue arrive, do you or your client have the right to refuse them entry or to refuse their request for production of information? Can your client call you, or can you call another advisor?

As a solicitor, you are an officer of the court and must act reasonably. Do you know your rights and your client's rights? What statutory protection is afforded to you and your client in these circumstances?

It is important to note that whilst recent Finance Acts (particularly in 1999) have dramatically increased the powers of the Revenue, there have been no corresponding statutory safeguards introduced for the taxpayer or advisor. To the extent that any safeguards exist, they are contained in Revenue Statements of Practice and internal Revenue operations manuals. Suffice it to say that internal guidelines or operations manuals are of questionable legal standing and offer little comfort to a taxpayer or to you as an advisor.

2. What to do if the Revenue arrive at your office

So what can you do if the Revenue call at your office demanding immediate access and production of client files or information? You should:

• Seek proof of identity of all Revenue officials present. Each official should have an authorisation card that will have on one side the statutory authority and a Revenue Commissioner's signature and, on the other side, the officials name and photograph, the legislation for which the officer is authorised and the number of the card. The card also has the Revenue Commissioners hologram.
• If a Revenue official does not have his authorisation card, refuse him entry and send him away. The official should also provide you with a business card showing his name, address and contact details.
• Check that the Revenue officers authorisation to exercise powers at a taxpayers or an advisors premises is set out on his authorisation card.
• Revenue officers are required to produce their authorisation card on first meeting the taxpayer and/or his advisor. The officer should, if requested, allow an advisor or the taxpayer to read the authorisation card and to take notes from it.
• Always ask the Revenue official for the purpose of the visit and the legal basis for the request to be produced in writing. Get a copy of the warrant, if one exists, and a copy of the relevant legislation.
• If the search is under warrant, check that the warrant has been validly issued and information therein is correct.
• Ask the Revenue official if it is a criminal prosecution matter. If the answer is yes, then remember that any statement you make may be used in a subsequent case against your client.
• If you are unsure of your legal position, ask the Revenue official to wait while you seek advice from a solicitor practising in the area of tax disputes/tax counsel or, alternatively, arrange for the official to return once you have taken advice. This matter is at the Revenues discretion.
• If the solicitor responsible for the client file is not present in the office, inform the Revenue official of this fact and ask him to wait or return when the relevant solicitor is present. Again, this matter is at the Revenues discretion.
• Never hand over client information without considering whether privilege applies to it. Remember, if you disclose client information incorrectly you are responsible, so, if you are unsure of your legal position, seek advice.
• The Revenues powers relate to specific named clients. The Revenue are not entitled to do a general trawl of client files. Ensure that any search is controlled by you and confined to the documents of the named client.
• Take copies of any documents that the Revenue are removing from your premises and obtain a written receipt from Revenue before they leave the premises.
• Ideally, you should have a colleague present to witness all exchanges with the Revenue officials. Ensure both you and your colleague make a contemporaneous note of events.
• Advise your client in writing of events and the information sought or given.

3. When the Revenue make a house call

Article 40.5 of the constitution protects the inviolability of the dwelling of the citizen, providing that it 'shall not be forcibly entered save in accordance with law'. This provision clearly protects the home of the citizen against unlawful entry.

The question of what then constitutes a lawful entry has arisen in a number of cases concerning the validity of search warrants. The issue of such warrants is a highly technical and complex area of criminal procedure.

The Revenues main search and seizure powers are set out in sections 903, 904 and 905 of the Taxes Consolidation Act, 1997 (TCA) and broadly provide that:

• The Revenue have the right to enter any premises without a warrant (except premises wholly used as a dwelling house) and to seize documents (chapter 4 of part 68 of the TCA). They are permitted simply to enter, search, examine and retain documents and other records for the purpose of examination. Clearly, this gives rise to an issue in relation to any premises that are partly used for domestic/business purposes, such as a home office.
• In general, no objective criteria need to be satisfied, such as a suspicion that an offence has been committed, before the Revenues search and seizure powers can be exercised (except in the case of a premises used wholly as a dwelling house). This is in contrast to other similar powers given in non-tax legislation.
• The Revenue are required to obtain a warrant to search premises that are 'wholly used as a dwelling house'. A warrant may be issued by a district judge where he is satisfied that it is proper to do so. Section 905(2A) of the TCA empowers the search and seizure of documents by the officer but offers no guidance as to the purpose behind such search and seizure.

The sub-section also envisages anticipated future breaches of Revenue law. Warrants may be issued where it is reasonably suspected that a person 'may fail' to comply with the acts and such failure is likely 'to lead to serious prejudice in the proper assessment of collection of taxes'.

A pre-emptive strike against anticipated criminal behaviour, leading to a loss of liberty, has been held to be unconstitutional by the Supreme Court. In the words of Walsh J., 'the accepted method of preventing the commission of future offences is the threat of conviction and punishment'.

• There is no time limit for the return of seized documents.

In summary, your home and that of your client is inviolable and the Revenue cannot gain access without a warrant. In my experience, however, this does not preclude the Revenue from arriving at your home after business hours and seeking access by consent.

4. Private and confidential

In Haughey and Others v Moriarty and Others¹ the nature and extent of the right to privacy of ones own records, and how it might be invaded, was considered at length. The judgment clearly acknowledged, in general terms, the existence of a constitutional right to privacy and its scope:

The judgment then went on to acknowledge the existence of situations in which the public interestin defeating wrongdoing may outweigh the public interest in the maintenance of confidentiality.

The Revenue have significant powers (mainly to be found in sections 900, 901, 902, 904, 906 and 907 of the TCA) to seek the production of documents from taxpayers or advisors in relation to a taxpayer. Some of the key areas of concern in relation to the Revenues current information-seeking powers are:

• No precondition is required before the Revenue activate use of these information-seeking provisions. For example, there is no need for a taxpayer to have failed to file a return or to file an unsatisfactory return.
• The Revenue have identical powers under sections 900, 901, 902 and 902A of the TCA to request documents, the only distinction being that one requires recourse to judicial authority to activate use. The election as to which power is to be used rests solely with the Revenue - no independent review of the decision is available and no right of appeal exists (for instance, where there is a dispute as to the reasonableness of the request or where there may be a question as to the relevance of documents and information sought). In certain cases, this can cause considerable disruption to business.
• If the Revenue proceed with a court application to seek information by formal notice from a taxpayer or from an advisor, the taxpayer receives no notice of any such application nor does he have the right to be represented in court on the making of any application by the Revenue. Therefore, no right of appeal exists.
• In the context of requests for information by the Revenue from a third party (such as a financial institution) in relation to a particular taxpayer, there is no requirement to first request the information from the taxpayer.
• There is no requirement for the Revenue to have reasonable grounds for suspecting that the taxpayer is in breach of the TCA or that a serious prejudice to proper assessment or collection will arise before the Revenue can make an application to the appeal commissioners to obtain financial information regarding a taxpayer.
• There is no redress for taxpayers for damage to reputation where the Revenues information seeking powers from third parties are used in error.
• There is no time limit attaching to the age of documents that may be requested by the Revenue, thereby forcing taxpayers and advisors to retain documents outside the current statutory time limits.

Basically, the Revenue can obtain most information in relation to a clients business that they request, except privileged documents, and they can use all information garnered provided that it was properly obtained.

5. Report of the Revenue Powers Group

As a member of the Revenue Powers Group, established by the minister for finance in March 2003, I was involved in advising in relation to a number of issues relevant in the context of the main statutory powers available to the Revenue Commissioners to establish tax liabilities, including investigation with a view to prosecution for Revenue offences.

As is obvious from the above issues relating to the Revenues use of search and seizure and information-seeking powers, there is a real need for the introduction of proper statutory safeguards for the taxpayer and his advisor.

Among the conclusions set out in the report of the Revenue Powers Group was that:

The Revenues powers in Chapter 4 are characteristic of those of other (sic: foreign) administrations and the Revenue Powers Group accepted the need for such powers, provided that adequate statutory safeguards are introduced for the taxpayer, including additional appeal provisions. The legislation must contain key restraints on the use of (sic: Revenues) powers, which can then be amplified in codes of practice and operations manuals'.

While the recommendations of the report are currently under consideration, it is of critical importance that this opportunity is taken to redress the balance in favour of the taxpayer and his advisor. This is not merely 'a tax advisors wish list' as one commentator put it; rather, it is a basic component of any developed tax system.

She was the only solicitor member of the Revenue Powers Group, whose report was published in February.