One of the Government’s response to COVID 19 was to provide the Commissioner of IRD with a limited power (limited to a 18 Month period) to make statutory variations. This allows IRD to modify time-frames or procedures impacted by COVID-19.
The Commissioner can exercise the discretion when it would be impossible, impractical or unreasonable for a customer to comply with time-frames or procedural requirements due to the impact of COVID-19, or the response measures taken by the Government to COVID-19. Taxpayers can choose not to apply the variation if they wish.
Last week IRD issued COV 20/04 providing a variation to the time-frame to write off bad debts. Generally to be tax deductible in an income year a debt must be written off as bad in the income year (i.e. before 31 March for most). However, with the Level 4 Lockdown for many businesses this was the last thing on their mind at 31 March.
Under the variation the time-frame by which a debt must be written off as bad in order for a tax deduction to be available has been extended to 30 June 2020 (i.e. a debt written off between April 2020 and June 2020 can still be tax deductible in the 31 March 2020 year). There are two conditions, the first being that the debt was not written off by the end of the income year because of the impact of COVID-19 and the second being only information that was available at the end of the income year is taken into account.