IRD tax payments during COVID-19 - your tax options

IRD will have the power to waive use of money interest (UOMI) if those significantly impacted by COVID-19 cannot pay their tax on time. Here’s everything you need to know.

IRD interest write-off - frequently asked questions

From what date will the UOMI remission apply?

IRD has the discretion to remit UOMI on payments due after 14 February 2020.

To what payments will this UOMI remission apply?

The remission will apply to all IRD tax payments such as income tax, PAYE and GST and other payments (e.g. Working for Families) where IRD charges UOMI.

Who can apply to receive this UOMI remission?

Anyone impacted by COVID-19 (coronavirus) who is unable to pay their tax on time or in full is eligible to apply.

Are there certain criteria that must be met in order to receive this UOMI remission?

In order to be eligible, a taxpayer must satisfy IRD that they are:

  • Physically unable to make their payment when it’s due because of COVID-19; or
  • Struggling financially to pay on time because of the economic impact caused by the COVID-19 outbreak.

IRD also requires taxpayers seeking relief to both contact them and pay the tax they owe “as soon as practicable”.

However, IRD says it will be quite flexible around how it applies the criteria in practice.

If a taxpayer says they cannot pay due to COVID-19, then they will take their word for it. They also say they will grant most requests for a remission of UOMI so long as the tax relief is for no more than two years.

Someone DOES NOT need to have exhausted all financing options before approaching IRD.

How do I apply for the UOMI remission?

A taxpayer seeking relief needs to contact IRD as soon as they can. They recommend doing this via the myIR online portal as it will be faster.

For companies belonging to the same group, one application is fine.

However, someone requesting relief for multiple taxpayers must file individual applications as the circumstances for each one is likely to differ.

Should I prioritise paying certain tax types when seeking a remission of UOMI?

This is up to a taxpayer to decide. IRD says it will not come down heavy on someone if they opt to pay other taxes ahead of GST or PAYE.

How will the UOMI remission work for 2019 terminal tax payments due on 7 April 2020?

IRD will only remit UOMI on terminal tax for the 2019 tax year after 7 April 2020. UOMI incurred up until this date will not be wiped as this portion of interest has not been charged due to the late payment of the terminal tax.

How will the UOMI remission work?

It’s important to note this is not a two-year holiday or deferral from tax payments.

A taxpayer wanting a remission of UOMI will be put on a payment plan (such as an instalment arrangement) with IRD. The type of payment plan and its duration will be determined based on the taxpayer’s situation.

UOMI and late payment penalties will continue to accrue during any arrangement entered.

However, IRD tells us its system has been coded to suppress these from appearing on the myIR statement of a taxpayer requesting tax relief. This is to ensure there is no confusion around the tax amount they must pay.

Once a taxpayer pays the tax they owe, IRD will deem they have met the criteria for a remission and automatically cancel UOMI. Late payment penalties will also be waived.

What happens if a taxpayer granted a UOMI remission does not or cannot pay the tax they owe?

Those who choose not to pay the outstanding tax will face UOMI from the date they stop complying with their arrangement.

However, in the event a taxpayer has made every attempt possible to pay their liability and still has an outstanding amount due, IRD says it will likely use its discretionary powers to write off the remaining balance.

How long will IRD remit UOMI?

IRD’s discretion to remit UOMI on tax paid late due to COVID-19 under s183ABAB Tax Administration Act 1994 will apply until 25 March 2022.

*The information on this page is correct as at 30 April 2020. It is subject to change.

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How TMNZ can help

For those feeling the impact of COVID-19 who DO NOT meet the criteria to have UOMI waived, TMNZ can provide tax help. With interest rates at historical lows, tax pooling is the next best option to manage cashflow and tax payment obligations during this difficult economic time.

The service can be used to defer payment of 2020 provisional tax until up to June 2021. It also provides an additional 75 days past the terminal tax due date to settle any 2019 income tax obligations, without having to worry about late payment penalties and UOMI.

Pay provisional tax

When it suits your business while reducing interest costs and penalties

Reduce risk on overpaid tax

Reduce tax liability risk and potentially earn more interest.

Reduce tax audit costs

And save up to 30% on IRD interest for reassessed tax

Do you work for an accounting firm and manage taxpayer clients?

TMNZ can help give your clients more flexibility around their tax payments