Revenue agency audits

The structural feature of this field is that a deduction is not an event but a series. Each instalment claimed opens an assessment period of its own.

Each annual instalment is claimed in a return, and each return opens its own assessment period. Exposure to audit therefore does not end with the first return but renews with every instalment.

On a ten year deduction the last instalment is claimed nine years after the first, and the period for that instalment runs from that return. The position therefore stays open for over a decade.

This is why the retention horizon for the documentation matches none of the ordinary horizons of a technical practice. Retention should be planned on a tax horizon.

The assessment periods are those of general tax law and run from the return in which the instalment was claimed. The circumstances extending them should be checked against the text in force.

Because their length and the circumstances extending them are tax matters subject to change, checking the period applicable to an actual case belongs to the taxpayer's tax adviser. The professional adopts the more prudent horizon.

What concerns the professional is the practical consequence: the horizon is long, extends well beyond completion of the works, and should be taken as the retention parameter. The duration of the appointment is not a usable parameter.

Audits follow recurring patterns, and knowing them allows the file to be built in the right direction. The same elements recur in almost every assessment.

Element	Subject of the check
Payment method	Compliance of the instruments used and traceability of the expenditure to the claimant
Building consents	Existence, consistency with the works carried out and planning regularity of the property
Connection of the expenditure	Link between the items invoiced and the eligible works
Deadline bound formalities	Timeliness of electronic transmissions where required
Certifications	Completeness, soundness and consistency with the technical documentation
Personal conditions	The claimant's title and the match with whoever incurred the expenditure

The first row produces the greatest number of disallowances, and concerns an error made at the start of the site and discovered years later. It concerns the payment method.

On audit the administration requests the documentation supporting the deduction, which is the same material composing the project file. A complete file reduces the audit to a formal check.

One element deserves flagging because it escapes ordinary logic: documents must be produced in the form in which they existed at the time of the events. A document reconstructed afterwards, even if substantively correct, carries different evidential weight from one produced contemporaneously.

This is why the photographic record of the state before the works and the data of the systems removed carry, on audit, a weight out of all proportion to the cost of producing them. The cost of producing them is a few minutes on site.

A negative outcome leads to recovery of the relief claimed, with the consequences tax law attaches. The recovery covers the whole instalment wrongly claimed.

Two points on the scope of the effect.

Recovery concerns the instalments already claimed and bars the remaining ones. On a ten year deduction challenged in the fifth year, the total financial effect is therefore greater than the individual instalment suggests.

The assessment is addressed to the taxpayer who claimed the deduction. The position of a professional who gave a certification is separate and follows its own path.

This is the aspect directly concerning a practice and which the Superbonus period made concrete. It concerns the separate position of the certifying professional.

A certification given for the purposes of a tax relief produces effects towards the revenue administration. It is challenged within tax assessment periods rather than within the contractual relationship with the client.

Three safeguards delimit the exposure.

Retaining the technical material on which the certification rests, for a period aligned with the assessment deadlines. The appointment ends before the assessment periods do.

Documenting the checks actually carried out, which distinguishes a well founded attestation from one given on material supplied by others. An attestation given on unverified material is the most exposed position.

Contractual clarity on the scope of the appointment, delimiting what the professional verified and what was assumed. The boundary must be written before rather than after an assessment.

Four actions significantly reduce exposure and cost little if taken at the right moment. None of the four demands significant resources.

Checking the payment method before the first payment, because it is the error that cannot be cured. The check takes a few minutes.

Photographing the state before the works and the components before removal. After removal the element cannot be reconstructed.

Fixing and documenting the completion date, which is the starting point for the deadline bound formalities. An uncertain date makes the deadline itself uncertain.

Assembling the file at the closing of the site and archiving it on a retention horizon aligned with the tax deadlines rather than the duration of the appointment. The archiving should be planned rather than improvised.

Archiving the file on the site's horizon is the first. The assessment periods run far longer.

Reconstructing afterwards documents that should have been produced contemporaneously is the second, and weakens their weight. Contemporaneous documentation carries greater evidential weight.

Assuming the audit concerns only the taxpayer is the third, and overlooks the separate position of the certifying professional. The certifying professional can be called separately.

Treating the position as closed after the first return is the fourth, and ignores that each instalment opens its own period. The position stays open until the last instalment.