IRD has issued guidelines for the remission of UOMI on tax obligations due after 14 February 2020.
To qualify, you must satisfy the department that you are physically unable to make their payment when it’s due because of COVID-19 or that you are struggling financially to pay on time because of the economic impact caused by the outbreak of the virus. IRD also requires taxpayers seeking relief to both contact them and pay the tax they owe “as soon as practicable”. Sounds simple, but then this is the IRD and it’s the details that add the complication.
To demonstrate “struggling” IRD says there must be a reduction in income or revenue as a result of COVID-19 which prevents them from paying their tax on time and in full. The IRD can ask you to provide the following information when applying for a remission of UOMI:
‣ Bank and credit card statements for at least the last three months.
‣ Any management accounting information.
‣ A list of aged creditors and debtors.
‣ Confirmation that a bank or lending institution has declined funding
If IRD reviews the information and decides you could have paid on time, it will expect you to pay –and will take appropriate action if you don’t.
As soon as practical is not defined and IRD will consider on a case by case basis, but as a general guideline, they say someone will satisfy this requirement if they both apply for relief and agree to pay the tax at the earliest opportunity (or over the most reasonable period given their specific circumstances). Best to contact sooner rather than later, and the options can include:
‣ An instalment arrangement with a deferred payment start date.
‣ A partial write-off due to serious hardship and payment of the remaining tax by instalment or a lump sum.
‣ A partial payment and balance write-off under maximising recovery of outstanding tax.
‣ In serious cases of hardship, IRD says it may agree to write off the debt.
UOMI and late payment penalties will continue to accrue for those who enter a payment arrangement.
However, once a taxpayer pays the tax they owe and IRD deems they meet the criteria for remission, it will automatically cancel UOMI.
Tax pooling or Tax Financing may be a better option, as this gives more flexibility and no need to provide any financial information. Please get in touch with us today if you wish to know more about Tax Pooling.