Love them or hate them, IR10s are an important part of our annual return filing process, and IRD are especially precious about them. Last week IRD issued a draft operational statement outlining why it is the Commissioner’s preference for the majority of taxpayers to file an IR10, and how this interacts with section 108 Tax Administration Act 1994 (TAA).

Historically, there have been some disputes with IRD where they have relied on the incorrect information submitted in an IR10 to reassess past the 4 year time bar within section 108 of the TAA. This has resulted in some firms filing paper based Financial Statements, rather than completing the IR10. This causes administrative headaches for IRD as it requires them to manually input the information required into their system in order to ensure that all and sundry, who rely on the information for reporting, forecasting and risk analysis have the most accurate information possible. 

Over time, IRD have tried their best to improve matters by clarifying the four year time bar treatment in various TIB’s, and also improved the IR10 to better reflect financial statements. Now they have issued this draft statement to sell why IR10 filing is important to all, and to assure us that the four year time bar will not be affected by filing an IR10 rather than providing a full set of accounts. 

One identified benefit is that it will save businesses additional compliance costs as, by completing the IR10, it means that the Department of Statistics won’t be knocking on your door asking for information. Perhaps more convincing is their proposed operational approach where an omission of income has occurred due to limitations in the IR10, and it is worth stepping through this in the statement. One wonders however how easy this will be to establish. 

If you want to have a say about the Commissioner’s proposed approach the deadline for comment is 24 March 2016.