With news of the government's stimulus package, a record low OCR, and IRD'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:
Is IRD waiving all UOMI and penalties on late tax?
Answer - No, it will be targetted to businesses that meet certain criteria. There is no blanket removal of UOMI and penalties on late payments.
The COVID-19 tax legislation passed under urgency on 25 March has confirmed the early guidance given to us by IRD. On the same day IRD released the following regarding the late payment of taxes:
“If your business is unable to pay its taxes on time due to the impact of COVID-19, we understand, you don’t need to contact us right now. Get in touch with us when you can, and we’ll write-off any penalties and interest.”
This statement reads as fairly open-ended. However, under the new law, these write-offs will only be applied where the taxpayer is "significantly adversely affected by COVID-19". Early indications are that in practical terms, taxpayers will need to demonstrate the following to IRD:
- a 30% drop in revenue/income as a result of COVID-19; and,
- that they have sought financial assistance (e.g. a bank overdraft extension) and been turned down.
Not all taxpayers will meet these criteria, and it will take time and effort to provide the required evidence to IRD.
The challenge for taxpayers is that they may not know whether they meet the criteria above (in whatever final form that takes) and/or have been granted discretion before the tax is due to be paid.
This is why Tax Traders is providing complimentary feeGuard (our money-back guarantee) on any 7 May 2020 tax that you finance so if IRD does waive your UOMI you can cancel your arrangement with us and get your interest back.
Will you have tax in the pool to sell?
Answer - Yes.
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?
Answer - Yes.
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.
Is IRD also waiving late payment penalties?
Answer - Yes.
If a taxpayer receives a concession on their late payment UOMI, IRD will also waive any late payment penalties that apply.
What's feeGuard, and why is it now free?
Answer - feeGuard is our insurance product, designed to give taxpayers more flexibility with their delayed payments. We want to make it easier for taxpayers to keep cash in their business so we are making feeGuard free, and automatically including it with any arrangements where interest is paid upfront.
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.
This means that the decision to fund your upcoming tax is an easy one.
- If you fund too much, you'll get that portion of your interest back.
- If the IRD agree you are significantly impacted and waive your use of money interest, we'll give you a refund of your interest.
- If IRD don't agree and you should have paid the tax - you're already covered because you've taken proactive steps with Tax Traders.
Don't hesitate to get in touch
If you have any other questions, or need any help, you can call us on 0800 829 872 or at firstname.lastname@example.org
Find out more about Our response to COVID-19 here or go to our Finance page to find out how easy it is to delay your upcoming tax payment. We'll include these answers on our website as well.