Don't Ignore the Nudge: A Content Creator's Guide To Understanding Revenue's Level 1 Notifications

The content creation industry has seen exponential growth in recent years, especially in Ireland. An Adobe study reveals that nearly one in four people in surveyed countries are now active creators. This isn't just a hobby; it's becoming a significant part of the economy. But, as with any emerging industry, regulatory agencies often lag behind in adapting their frameworks. Recognising this gap, the Irish Revenue Commissioners have issued "nudge letters" aka Level 1 notifications to Irish content creators urging them to regularise their tax affairs:

• https://www.independent.ie/irish-news/irish-influencers-urged-by-revenue-to-declare-their-online-income-gifts-and-free-use-of-services/a1099694617.html
• https://www.thejournal.ie/influencer-tax-audit-6187146-Oct2023/?

What's different this time?

The last digital industry to come under Revenue's scrutiny was Airbnb hosting in 2018. Back then, Revenue decided to issue investigation notices, (the highest level of intervention) and although it wasn't particularly hard to show the liabilities, it was like trying to fight your way out of a snowstorm by licking each snowflake you can reach, fun maybe (and briefly), but largely turned out to be a fruitless exercise due to the resources and effort involved in conducting the investigations. This time, Revenue is taking a more nuanced approach, issuing Level 1 notifications and judging the responses instead of diving straight into full-scale investigations.

What is a level 1 notification?

A Level 1 notification is not just a letter in your mailbox; it's a multi-channel approach by Revenue to remind you of your tax obligations. Designed to be broad-based, these interventions occur before Revenue dives into any detailed examination of your financial records. They can manifest in various ways:

• Reminder Notification of Outstanding Tax Returns: A nudge to file your pending tax returns.
• Request to Self-Review: An invitation to revisit your submitted tax returns for any discrepancies.
• Profile Interviews: A one-on-one, either online or in-person, to understand the nature of your business.
• Cooperative Compliance Framework (CCF): An engagement model for businesses to ensure tax compliance.

Ignoring these notifications can escalate your case to a Level 2 or Level 3 intervention, which involves more stringent scrutiny and significantly higher penalties without the opportunity to make a voluntary disclosure.

How To Deal With A Level 1 Notification

1. Don't Ignore It: The worst thing you can do is ignore the notification. This will only complicate matters. Revenue is usually fair; they're open to time extensions and reasonable allowances. But you've got to take the first step and engage. Dodging the issue only makes your tax situation more difficult to manage in the future.
2. Self-Review: Use this opportunity to go through your tax returns. Make sure everything is in order, and correct any errors you find.
3. Engage in the Process: If you're unsure about any aspect, consult a tax adviser. It's better to be proactive than to wait for the situation to worsen.

Addressing Level 1 Interventions

After receiving a Level 1 intervention, you have three main avenues to address compliance matters:

1. File Outstanding Returns: If you have any tax returns that are overdue, file them now. Completing this step not only brings you into compliance but also shows good faith, which is beneficial when dealing with Revenue.
2. Self-Correction: This is your chance to amend any errors in your tax returns without penalties. It's a proactive measure to align your records with what Revenue expects.
3. Unprompted Qualifying Disclosure: This involves voluntarily disclosing any irregularities in your tax records before Revenue takes any investigative action. Opting for this can significantly reduce penalties and offer protection against legal actions.

Irish Revenue's issuance of Level 1 notifications to content creators signifies a more nuanced approach to tax compliance in this burgeoning industry. It's crucial to engage in the process and not ignore these notifications. If you find yourself in this situation and are unsure of how to proceed, we encourage you to reach out for an initial conversation.

You can schedule a 15-minute no obligation call with us here.