Getting a letter from Revenue can feel unsettling. Words like “audit” or “compliance intervention” trigger instant anxiety, but not every letter means serious trouble. Since 1 May 2022, Revenue has used the Revenue Compliance Intervention Framework to manage tax risk across three levels. Understanding which level you’re facing, and how it works, is essential to responding effectively, protecting your position, and minimising penalties.
The Three Levels of Compliance Intervention
| Level | Type | Purpose | Typical Outcome |
|---|---|---|---|
| Level 1 | Engagement & assistance | Encourage voluntary compliance, fix minor errors | No penalties if corrected quickly |
| Level 2 | Risk Review or focused audit | Investigate identified risks or discrepancies | Possible penalties, prompted disclosure option |
| Level 3 | Full audit / investigation | Examine multiple taxes and years, possible criminal investigation | Higher penalties, potential prosecution |
An intervention can start at any level. There’s no requirement to begin at Level 1.
Level 1: Engagement and Education
This is the lightest form of intervention. Revenue uses it to nudge you toward fixing something small before it escalates. Examples include a reminder to file a return, a query about a small VAT difference, or a request for supporting documents for a deduction. You can still make an unprompted qualifying disclosure at this level, which can significantly reduce penalties and avoid publication. The aim is self-correction without formal investigation.
Do you need a tax advisor? Usually not, but if you’re unsure why Revenue is contacting you, a short consultation can give you peace of mind.
Level 2: Risk Review or Targeted Audit
Level 2 is more serious: Revenue has identified a specific risk or inconsistency in your tax affairs. There are two types: a Risk Review, narrowly focused on one issue (like a VAT refund claim that doesn’t match your sales data), or a focused audit, a broader check possibly covering more than one tax type or period, but still linked to identified risks.
Once you’re notified of a Level 2 intervention, unprompted disclosures are no longer possible for that issue. You move to a prompted disclosure process instead, with a defined window to respond and request an extension if needed. Risk Reviews have replaced what used to be called “aspect queries,” and are usually handled by correspondence, with on-site visits only when necessary.
A Level 2 letter will clearly state the intervention type and start date, the scope (tax head, periods, documents required), and your rights, including making a prompted qualifying disclosure. Revenue might request details of specific activities, financial reconciliations for the review period, or supporting evidence such as invoices, payroll data, or contracts.
Common questions: how far back can Revenue go? Normally a set number of years, but there’s no limit if fraud or neglect is suspected. How does Revenue decide who to review? Through data analytics, cross-checking returns, industry risk profiling, and third-party information. How long should you keep records? See Revenue’s guidance on record-keeping for the current requirement.
How to prepare: gather all requested records promptly, compare your returns against source documents for discrepancies, avoid guessing if you’re unsure (“I’ll confirm and get back to you” is a fine answer), and maintain a calm, factual, cooperative tone throughout.
Do you need a tax advisor? Highly recommended. A professional can spot issues, prepare disclosures, liaise with Revenue, and negotiate penalties.
Level 3: Full Revenue Audit or Investigation
This is the most serious stage: a wide-ranging audit across multiple taxes and years, often investigating for deliberate default or fraud. Common triggers include large, unexplained underpayments, evidence of false invoices or hidden income, and repeat non-compliance despite earlier warnings. The purpose is to verify tax accuracy, recover unpaid taxes, and in serious cases, gather evidence for prosecution.
The auditor’s role is to request and review records, ask clarifying questions, verify facts against returns, and issue findings outlining penalties or further action. The typical process runs: notification letter, records request, an on-site or remote meeting if needed, review and cross-check, then an outcome letter with assessment and penalties.
What not to say: avoid guessing or speculating, and avoid volunteering information beyond what’s requested unless it genuinely clarifies a point.
How to make a good impression: provide organised records quickly, stay consistent in your answers, and remain professional and courteous throughout.
No receipts? Revenue may disallow claims and assess additional tax. Keeping digital backups and duplicate records where possible protects you here.
Do you need a tax advisor? Yes, and possibly legal representation for serious cases.
General Preparation Tips for Any Intervention
Stay calm, since anxiety leads to mistakes. Check the level before acting, since your options differ significantly by level. Respond within deadlines, since missed dates limit what you can still do. Keep thorough records, paper or digital, accessible and complete. Be transparent: honesty and clarity go a long way with Revenue.
Likelihood and Prevention
Revenue targets most reviews and audits using data analysis, with risk higher for late returns, unusual claims, or inconsistent filings. Most taxpayers won’t face one, but certain industries and patterns carry higher risk. The best prevention is straightforward: keep filings accurate and timely, maintain clean records, and review returns before submission. Our Monthly Bookkeeping Checklist and Revenue Compliance Calendar both help build that habit.
Key Points From the Code of Practice
The framework applies to all taxes and duties except customs. Revenue can start an intervention at any level. Disclosure timing is critical, since unprompted disclosures end once you’re notified, and correcting a return in ROS on its own doesn’t count as a formal disclosure; you need to notify Revenue directly.
Need Help Getting Your Records Audit-Ready?
We’re not tax advisors, but we help businesses stay organised, compliant, and ready for any Revenue compliance intervention or audit: organising your records so they’re easy to retrieve, keeping payroll and bookkeeping clean and up to date, and working with your chosen tax advisor to make responding to Revenue smoother.
Final Thoughts
A Revenue compliance intervention or audit doesn’t have to spell disaster, but the higher the level, the higher the stakes. Acting quickly, preparing thoroughly, and getting professional advice where needed can save real stress, time, and money in the long run.