This week IRD have released a Standard Practice Statement, SPS 18/04 “Options for relief from tax debt”. While not really new, it is the amalgamation of three older statements which covered making instalment arrangements, remission of penalties and interest and the Commissioners practice for writing off debt.
You could say that the Department’s practices have changed over the years. Traditionally they took a hard stance, then there was quite a turn around when the debt and hardship provisions were introduced, and then some movement back to a harder stance again. Financial relief still exists of course, but we are seeing the department being much more proactive by making direct contact with clients without speaking to us first which is always a bone of contention! This change in stance is certainly supported in the latest statement which outlines early on that where the Commissioner has discretion about whether or not to grant relief, the decision rests with them and is not available as of right.
The statement is thorough and walks through the options, including your more common situations of instalment arrangements and write off for serious hardship, and IRD’s process to determine whether relief options will be given. It also discusses relief options available for Trusts and when serious hardship could apply, how write off may impact tax losses, and the Commissioners position on deciding whether to write off under section 6 and 6A for being an inefficient use of resources.
In our experience IRD can be inconsistent with the application of the debt relief rules. Hopefully the refreshing of the statement will bring more consistency, but still to a certain extent it will come down to an officer’s interpretation on what relief is appropriate. The statement will give you the ability to prepare and put your best foot forward with a negotiation so is worth reviewing. Our tips include, dealing with the issue early, and if you are able to negotiate an arrangement, make sure it is adhered to. Any previous “bad behaviour” will be a strike against you, and any future relief.