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Accumulus Newsletter - April 2020                                                                                                                                                                                             

 14 April 2020


Hello

What follows, will be of particular relevance to any clients who are struggling to pay taxes due as the result of the Covid 19 lockdown.



Overdue Tax AND COVID 19

HOW TO QUALIFY FOR IRD Waiver of Interest and Penalties

 

1.      Only applies to tax that is due on or after 14 February 2020.

 Pre existing tax debt is not covered by this dispensation.

 

2.      The ability to pay the tax must have been significantly affected by Covid 19.

Sales or income must have been significantly reduced as a consequence of Covid 19 resulting in the current inability to pay the tax. Presumably qualification for a subsidy would be indicative of a situation in which relief might be given.

IRD will generally regard continued filing of returns, especially GST returns, as giving them evidence of the qualification for remission of interest and penalties, but reserve the right to request detailed information if they feel this is warranted (as is the case for the subsidy).

 

3.      IRD must be contacted ASAP* to set up an arrangement.

IRD want to be informed as soon as possible of the taxpayer's circumstances. They regard setting up a payment plan as evidence of being informed.

The payment plan will still record the interest and penalties as being due but if the payment plan is adhered to the interest and penalties will be written off.

If you cannot make the payments agreed under the initial plan you must renegotiate a follow up plan to continue to be eligible for a write off.

*MYIR and Secure Online Services are unavailable until Thursday 16 April 2020, so if you haven't already done so you will probably not be able to "inform" IRD and set up an arrangement for a few days yet, but do it as soon as you can if you are hoping for interest and penalties to be waived on the late payment of tax.


 

WHAT ARE THE INTEREST AND PENALTIES ON OVERDUE TAX?

For Income Tax and GST a total of 5% late payment penalties are charged:

-      1% the day after the due date

-      4% seven days later.

 

Interest is at the IRD Use of Money Interest rate of 8.35% until paid.

(They pay you at 0.81%.)

So on $1,000 paid one month late the cost is $50 penalties $6.86 interest.

  

We hope your lockdown is going as well as it may,


With regards from all of us at Accumulus.

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