We all appreciate ‘Tax compliance can be complex’ – between Income Tax, GST, PAYE, FBT, RWT etc., there is a lot to manage and get right. And whilst rare, it is inevitable that from time-to-time errors can occur in providing correct return information. These can be in your favour, or against.
When these ‘oh-oh’ moments occur the important question is “what do we do next?”. Clue: Swift action is always advisable.
The Inland Revenue requires taxpayers to make a correct assessment of their tax liability when any tax return is filed. If any post-filing error has given rise to under payment / assessment, taxpayers are obligated to submit a ‘voluntary disclosure’ to have the tax return amended, and ensure correct filing.
If you suspect an error in your returns – or have been audited or queried by the IRD – we suggest to ask your advisor for assistance.
You may be required to make a disclosure, detailing any issues highlighted. Inland Revenue will ultimately review and decide if they agree with any adjustment. We caution where an adjustment is required that gives rise to an ‘increase in the amount of tax payable’, Inland Revenue will consider whether a shortfall penalty should also be charged. Shortfall penalties can also apply if the adjustment reduces the amount of a tax loss. Double Jeopardy? Your fast response and disclosure will assist in mitigating your position.
Any reduction in shortfall penalties for making a voluntary disclosure provides a material benefit to do so and should be the default option. Inland Revenue practice in the context of a voluntary disclosure is typically a positive experience, given the circumstances. So if in doubt – be proactive.