20 September 2022

Credit where credit is due, the Inland Revenue have bent over backwards with kindness over the last two and half years while taxpayers navigate COVID-19 cashflow challenges. Late payment penalties and use of money interest have practically been thrown out the window, replaced with ‘best forecasts’ of income and instalment arrangements. The average small business has appreciated being able to spread their very limited cashflow to meet GST, PAYE and provisional tax payments whist they struggle to collect their own debtors and stem outgoings.

But the tide is turning as Inland Revenue released details of the extent of instalment arrangements and ballooning overdue tax debts. We have certainly seen some recent push-back from Inland Revenue on current requests for COVID-19 related relief of penalties and interest and instalment arrangements. Whilst Inland Revenue has been fairly accommodating for arrangements on historic debt, they are now looking for assurances that taxpayers are able to keep on top of current and forthcoming tax obligations, most importantly for PAYE and GST.

As the Inland Revenue moves from assisting taxpayers, to engagement, and then to compliance and enforcement, we expect to see a return to a firmer approach of debt collection from Inland Revenue.

If you already have an instalment arrangement in place with Inland Revenue, ensure your monthly payments continue to be made on time. You also need to ensure you continue to file all tax returns on time.

If you find yourself unable to make a payment, we recommend engagement with Inland Revenue prior to the due date, where possible. Ongoing issues with meeting tax payments typically indicate a bigger cashflow issue and should be investigated.

Alas, outstanding tax debt never goes away by itself, but proactive management can mitigate exposure to penalties and interest. We can assist you with discussions and negotiations with Inland Revenue for all sizes of tax debt.

Please contact your Nexia advisor for further information, or you can get in touch via our general contact details here.

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