Important message for businesses regarding overdue tax payments
Inland Revenue has issued an important message for businesses regarding recent legislative change on the remission of use of money interest (UOMI). The message is intended to provide clarity on the remission of UOMI and other measures available to taxpayers who are struggling to pay their tax in full and on time as a result of the COVID-19 crisis.
The COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 was passed under urgency on 25 March 2020. Among other measures, new s 183ABAB of the Tax Administration Act 1994 gives the Commissioner a discretion to remit UOMI on overdue tax payments.
When the Commissioner will remit penalties and UOMI
To be eligible for remittance of UOMI and penalties, a 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 adversely affected by COVID-19.
The Commissioner may exercise her discretion to remit the interest if the taxpayer has contacted the Commissioner as soon as practicable to request relief and has paid the outstanding tax as soon as practicable.
The Commissioner’s ability to exercise the discretion applies until 25 March 2022.
Significantly adversely affected by COVID-19
It is the Commissioner’s view that a taxpayer has been “significantly adversely affected by COVID-19” financially where their income or revenue has reduced as a consequence of COVID-19 and, as a result of that reduction in income or revenue, is unable to pay their taxes in full and on time.
As soon as practicable
“As soon as practicable” will be determined on the facts of each case. For guidance, the Commissioner considers the term means that so long as the taxpayer applies for the relief at the earliest opportunity and agrees to an arrangement that will see the outstanding tax paid at the earliest opportunity, or will be paid over the most reasonable period given the taxpayer’s specific circumstances, the test will have been met.
Information to be provided
If asked, taxpayers should be able to provide at least three months’ banks statements and credit card statement, any management accounting information and a list of aged creditors and debtors.
Type of relief available
In addition to have the discretion to remit UOMI, if the tax debt is due to COVID-19 the Commissioner may:
- enter into an instalment arrangement (perhaps with a deferred payment start date)
- partially write-off the debt due to serious hardship, with payment of the remaining tax by instalment or a lump sum
- allow a partial payment, and write-off the balance, or
- write-off the debt due to serious hardship.
No leeway on filing returns
Inland Revenue notes that while taxpayers may have difficulty in paying their taxes on time, it is important that they continue to file their returns on time.
Source: Inland Revenue
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