The Government has added a new section 183ABAB into the Tax Administration Act giving the Commissioner ability to remit use of money interest (UOMI) if the taxpayer’s ability to pay tax on time has been affected by COVID-19. This applies to tax due on or after 14 February 2020.
IRD tells us they will be trying to minimise the information requested during these unusual times – and we have found them to be true to this over the past couple of weeks. But here’s what you should be prepared to provide if requested:
- Make sure your GST and tax returns are filed up to date.
- Three months of business bank and credit card statements.
- Latest management accounts for your business.
- A list of aged creditors and debtors.
Since the COVID-19 outbreak, IRD have been flexible and efficient in agreeing to instalment arrangements for tax payments due after 14 February.
We have also found IRD to be willing to renegotiate existing instalment arrangements where businesses can’t continue with the current terms due to being significantly affected by COVID-19.
As always with IRD, it’s important to get your returns filed by due date even if you can’t pay the tax – and best to contact them as soon as you believe you may have difficulty paying on due date or meeting your current arrangement.
Loss Carry-Back Scheme
A loss carry-back scheme was announced on 15 April enabling a business to offset an actual or forecast loss in a particular tax year against a profit in a previous year and receive a refund of the tax paid in the previous profitable year. Our thoughts are most taxpayers will not be in a position to accurately forecast their likely profit or loss for the year ended 31 March 2021 this early in the tax year – and there are likely to be penalties for getting it wrong.
This is probably a provision best made use of later in the year when we can better estimate 2021 losses – then potentially get the previous year’s tax reassessed.