Taxpayers physically unable to pay their tax on time due to COVID-19 can also apply to have IRD interest (UOMI) remitted.
The COVID-19 Response (Taxation and Social Assistance Urgent Measures) Bill – which contains several other tax measures – was passed through all its stages under urgency in Parliament yesterday.
The commentary for the Bill clarifies when IRD can waive UOMI due to the impact of COVID-19 under new section 183ABAB of the Tax Administration Act 1994.
“This section would allow [IRD] to remit [UOMI] if a taxpayer’s ability to make a tax payment on time is significantly adversely affected by an outbreak of COVID-19,” it reads.
“This would include both where a taxpayer has been physically unable to make a payment on time, for example, because they have been quarantined, and where a taxpayer lacks the financial means to make a payment on time because of the economic impacts of COVID-19.”
It’s the “physically unable to make payment on time” part in the commentary that piques our interest.
After all, the general assumption was the concession was only available to someone feeling the financial ramifications of COVID-19.
Nonetheless, it’s logical to have something that caters to those who physically cannot make a payment due to the current situation.
What ‘physically unable to pay’ means
We are seeking clarification from IRD regarding what constitutes being physically unable to make a payment on time due to COVID-19.
Our view is this will only apply to a handful of taxpayers.
For instance, take a person with no internet access or reliable phone service who lives in a remote rural area. They mightn’t be able to pay at their nearest bank because the branch is closed or operating on reduced hours due to the Level 4 lockdown. In this instance, they may be eligible for remittance of UOMI.
Someone who has caught COVID-19 and is so sick they cannot physically make payment by any means may also qualify.
However, anyone in self-isolation who can pay electronically will probably be out of luck.
Of course, that’s provided they don’t meet the financial impact criteria (keep reading).
Meanwhile…
The commentary also confirms IRD will only waive UOMI once a taxpayer pays the core tax they owe.
To receive a remittance of UOMI, the taxpayer must make a request to the Commissioner.
They must satisfy the Commissioner that they both sought this relief and made their payment “as soon as practicable” to qualify.
The COVID-19 UOMI waiver explained
IRD may remit UOMI on tax due after 14 February 2020 if someone cannot pay on time due to COVID-19.
It applies to all tax payments such as income tax, PAYE and GST and other payments (e.g. Working for Families) where they charge UOMI.
IRD is developing guidance on when a taxpayer will be eligible for UOMI to be waived.
Initially, they said someone must show at least a 30 percent reduction in revenue for the same period 12 months earlier and have exhausted all options to support themselves financially.
But like everything right now, that may be subject to change.
The UOMI concession will apply for two years after the enactment date of the Bill.
However, there is a provision in the legislation to extend it by an Order in Council.