There’s currently an awful lot of uncertainty out there for business owners and much of this is traceable to cash flow worries. Contrasting the unknown and possibly adding to the worries is tax – one of the certainties in life. Just around the corner is the 7th of May, a big date for both income tax and GST payers. So, you’ve got a bill – what are you going to do about it?
So, in short, it’s tax for what has already happened.
The rumour mill has been thriving amid the COVID-19 outbreak and one of the subjects we’re hearing get a bit of traction is around the Inland Revenue use of money interest remissions. Through the whispers this has ended up being interpreted as “I’ll just pay it later and there’ll be no penalties or interest”. This is definitely not the case.
Inland Revenue’s discretion applies and they have stated they will treat interest remissions on a case-by-case basis. Inland Revenue’s words are:
To be eligible for remittance of penalties and UOMI, customers must meet the following criteria:
– They have tax that is due on or after 14 February 2020
– Their ability to pay by the due date, either physically or financially, has been significantly adversely affected by COVID-19
– They 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
You’ll lose access to the money you currently have aside. This means you’ll lose the ability to utilise that money for any short-term solutions that may result from recovering from the impact of COVID. Once paid you’ll be up to date with your tax.
You can enter an instalment arrangement via your MyIR login to pay the tax over instalments. This can be weekly, fortnightly, or monthly and by over up to two years. You can also delay the first instalment by up to 60 days. Inland Revenue will charge interest and a penalty for this. Once the tax is paid, you can request consideration for remission of any penalties and/or interest charged – to reiterate, this is not a given.
For income tax, we can set up an instalment arrangement via a third party tax pooling service which has more flexible payment terms and a lower interest rate. Our preferred service provider is Tax Traders. Tax Traders have also offered to refund any interest they charge if Inland Revenue subsequently offers to remit interest and/or penalties for you. Contact us to discuss setting an arrangement up for you.
If your business is forced to shut up shop permanently due to the impacts of COVID, Inland Revenue will be understanding. Contact us to discuss the financial hardship application process.
You may have noticed there’s no option to do nothing – it is an option but not one we’d recommend. If you’re unsure on any of the above options, talk to your Outside go to and we’ll be able to help come to the best solution for your situation.
Missed our initial COVID-19 tax scheme treatment post? Check it out here.
Your Outside team and Ruby