Between a record low OCR and IR's proposal to eliminate UOMI on late payments, we're hearing some common questions around what it means for tax pooling. Here are some quick answers.
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Last updated 09 April 2020
The COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act was passed under urgency in Parliament on March 25th. This includes the COVID-19 UOMI concessions for taxpayers that were signalled on Tuesday 17 March as part of the Government's stimulus package.
Here's what you need to know
Is IRD waiving all UOMI and penalties on late tax?
No, it will be targeted to businesses that meet certain criteria. There is no blanket removal of UOMI and penalties on late payments.
- if a taxpayer has had their ability to pay tax on time significantly adversely affected; and
- they can show that this impact is COVID-19 related; then
- remission of UOMI is an option that may be exercised at the Commissioner’s discretion.
This appears to be a change from the legislative guidelines which required both a 30% drop in income and financial assistance (such as an extension to bank overdraft) to have been declined.
There is still no final guidance as to how the criteria above will be applied in real-life scenarios and whether the 30% drop in income will still be relevant.
What does “significantly adversely affected” mean?
At this stage there is not absolute criteria being applied by IR, however the act expands to say that being “significantly adversely affected” applies when a tax payer is physically and financially unable to make a tax payment on time.
The commentary to the Act uses being in quarantine as an example of what it might mean to be physically unable to make a tax payment on time. Additional commentary and advice out of IR suggest there isn’t hard and fast criteria for what constitutes being significantly financially affected. Being able to show a significant loss of revenue due to COVID-19 and having exhausted other options to support themselves could be applied, however there is no guarantee of this.
From when does this policy apply?
Interest that has accrued on tax payments due on or after 14 Feb 2020.
The Commissioner’s discretion to remit interest will apply to interest that has accrued on tax payments due on or after 14 February 2020. Provided (as set out above) that the taxpayer has asked the Commissioner to remit the interest “as soon as practicable” and has made the payment of tax "as soon as practicable".
Does the policy apply to 2019 terminal tax?
Yes. Any 2019 terminal tax dates that fall after 14 February 2020 will be considered by IRD.
This includes any taxpayers with a February balance date and extension of time (terminal date 7 March), and any taxpayers with March to September balance dates and extension of time (terminal date 7 April).
How do taxpayers apply to have UOMI remitted?
IRD has not yet confirmed the process.
We expect IRD will release more information around this in due course. Ahead of this we suggest that taxpayers both talk to their tax agent and communicate directly with IRD via myIR.
Note: You are welcome to apply for remission as well as setting up a delayed payment arrangement. Our peace-of-mind policy guarantees a full refund should IRD agree to waive your late payment interest.
Do taxpayers still have to pay the core tax itself?
Yes. The core tax will still need to be paid.
Our understanding is that the late payment interest will not be remitted until the core tax debt has been paid.
Is IRD also waiving late payment penalties?
Yes, though IRD had this capability prior to the recent Act being passed.
If a taxpayer receives a concession on their late payment UOMI, IRD will also waive any late payment penalties that apply. The IR already had power to do this prior to the new Act.
Keeping cash in your business is crucial in uncertain times like these and Tax Traders has been helping businesses achieve flexibility with their tax payments since our inception.
We are here to help businesses especially in times like these.
Here's what you need to know
Why not use the IR UOMI waiver?
It comes down to certainty and the time and effort to access the write-off. There is no guarantee this will happen and you likely will not know till after the tax is due.
At this stage there is no “checklist” of criteria that the IR are providing – ultimately the decision will be at the discretion of the IR Commissioner and will be on a case by case basis. Not all taxpayers will meet these criteria, and it will take time and effort to provide the required evidence to IRD. If you pay your provisional tax late and IR decides you do not fall in their criteria, you will be charged penalties and interest.
By contrast, a delayed payment can be set up within minutes, and acceptance is guaranteed. No lending documentation or security is required.
Will you have tax in the pool to sell?
We proactively manage supply to ensure we are always holding sufficient inventory to cover projected demand from taxpayers for the next nine months. Whether you order it through our website, over the phone, or by taking advantage of one of our software integrations if you can place the order then that tax is available, whether it is for FY19, FY20 or audit periods.
If I delay a tax payment, are you sure it'll be there when the finance matures?
When you set up a delayed payment we set the tax aside for you. The tax is yours provided you settle the principal on time.
In the light of COVID-19, we have made our feeGuard interest rate assurance complimentary to all. Under this peace-of-mind policy you can access the best of what both IRD and Tax Traders have to offer with confidence.
This means the decision to fund your upcoming tax is an easy one.
- When you delay upcoming payments through Tax Traders, we will provide assurance on the finance fee at no cost (this is a complimentary version of our feeGuard rate assurance).
- If IRD determine you meet the criteria and waive your UOMI interest, we will refund the full amount of your finance fee. No questions asked.
- If IRD determine that you are not significantly impacted, you will already have a delayed payment arrangement in place because you've taken proactive steps with Tax Traders.
- Further, if you fund more tax than you end up needing we'll refund that portion of your interest back to you.
Here's what you need to know
How can I access the Peace of Mind guarantee?
Simply set up a delayed payment through our portal or reach out to us directly via phone or email. We will automatically include this rate assurance on your delayed payment at no extra cost (historically this has cost an additional 0.5% to access).
Are there any conditions?
This scheme applies to any delayed payments that have an up-front interest payment and were set up with Tax Traders on or after 18 March 2020.
How can I access the refund if I get a UOMI waiver from IRD?
Simply forward us the confirmation of the waiver from IRD to email@example.com. We will deposit the full fee back into your nominated bank account within the next 48 hours.
What is feeGuard?
FeeGuard is our assurance to you, designed to give taxpayers more flexibility with their delayed payments.
It is also the mechanism we are using to provide this fee refund scheme. Traditionally feeGuard costs an extra 0.5% of interest, but it allows the taxpayer to recover that portion of their upfront interest cost that they wouldn't have paid if they had known at the start exactly how much tax they would ultimately need
What else should taxpayers think about?
Tax Traders’ guidance on this is if you have the resources and ability to pay your taxes you should, and we are here to help with that.
While it’s natural for taxpayers to focus only on their own position right now, continued tax revenue plays a critical role in enabling Government to fund assistance for those who need it and in leading the country out of an economic crisis. We encourage all those who can pay tax to continue to pay tax
- News and updates
- Frequently asked questions
- How tax pooling can help
- Understanding the IR's interest waiver
Resources for download
Peace of mind for tax finance
Access the best of IRD and Tax Traders with complimentary feeGuard.
How tax pooling can help
A one-page guide to relieving cash flow pressure with tax pooling.
- CA ANZ - Coronavirus resources
- Legislation - COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act
- Beehive - COVID-19: Economic Response Package
- IRD - COVID-19 information page
- New Zealand Government - COVID-19 links
- New Zealand Trade & Enterprise - Coronavirus
- Ministry for Primary Industries - Coronavirus and the effects on trade
- Ministry of Health - COVID-19 Novel Coronavirus