This is a busy time of year for paying tax, there is provisional and terminal income tax, maybe FBT as well as the usual suspects of PAYE and GST. All at a time when for many businesses, cash has stopped rolling in.
On the first of April, IRD sent out a nice sounding media release saying that they would write off interest and penalties for businesses that were unable to pay their taxes due to Covid-19, and that there wasn’t a great rush to get in touch with them as they understood these are unusual times. You can read it here: https://www.ird.govt.nz/Updates/News-Folder/covid-19-novel-coronavirus—tax-matters
However, many who work in the tax and accounting industry were a little skeptical of exactly what IRD meant by this, as historically their processes for write-offs have been full of obstacles. On April 8, IRD released some technical information to tax agents on how they would write-off interest. It includes the following:
To be eligible for remittance of penalties and UOMI, the taxpayer must meet the following criteria:
• The taxpayer has tax that is due on or after 14 February 2020;
• The taxpayer’s ability to pay by the due date, either physically or financially, has been significantly affected by COVID-19;
• The taxpayer will be expected to contact the Commissioner as soon as practicable to request relief and will also be required to pay the outstanding tax as soon as practicable.
IRD have stated they will charge interest and penalties but will write off the interest when the tax is paid at their discretion, and conditional on the tax being paid in accordance with an arrangement that that IRD has agreed too. As of yet, they haven’t confirmed how they will address the penalties.
Regarding entering into an arrangement, IRD have said this:
“customers should be able to provide, if asked, at least three month’s banks statements and credit card statements; any management accounting information; a list of aged creditors and debtors. We will not ask for that information in every case, but the information should be available if we do ask for it. For businesses, Inland Revenue will be looking to understand the taxpayer’s plan to sustain their business.”
All of this information has now been published on their website, it is available here: https://www.ird.govt.nz/covid-19-novel-coronavirus/tax-relief/uomi
In short, if your business can’t meet its tax obligations on time, it is likely to be able to get some sort of temporary relief. But it is also likely that it will still have to pay in full, and it is possible that there will be a bit of hassle in avoiding interest and penalties. So, if you’re in a financial position to do so, probably best to ‘pay the man’. If you’re not, better to get in touch with IRD sooner rather than later (or ask your accountant to do so on your behalf). Given the hold times on the phone, we would suggest sending them a message via MYIR (IRD’s secure portal) – if you don’t have a MYIR login, simply go to www.ird.govt.nz and click ‘register’.