Inland Revenue (IRD) has recently announced that it is significantly expanding their compliance activities as a result of additional funding in the budget.
IR will be making unannounced visits to hundreds of businesses who they believe aren’t meeting all their tax obligations as employers. These visits can lead to a full tax audit.
Anonymous tip offs
The businesses which will be visited have been identified from the list of nearly 7,000 anonymous tipoffs the department receives each year.
The volume of tipoffs has grown over previous years indicating an increased sense of frustration by the community in general with businesses who are not doing the right thing.
Inland Revenue’s has analysed the anonymous information at a high level. That’s shown the tax risks overwhelmingly relate to taking the cash for personal use without recording sales and/or paying employees in cash.
Risks
Those risks are higher where businesses deal directly with consumers and their goods and services are at a low average price point. The lower the average transaction value, the more likely a customer is to pay in cash.
Also, when businesses handle significant amounts of cash, business owners have a stronger means, motive, and opportunity to choose not to record the cash sales correctly for tax purposes.
Get it Right
Right now, IRD are focused on employer’s obligations, and they have ended up with nearly 300 employers across various sectors who they intend to visit and whose business practices they will be looking more closely at.
IRD says that “most businesses do the right thing, but there are those that don’t. We are aware of and actively seeking out and prosecuting those who aren’t paying their fair share.”
“Businesses need to keep a record of and declare all income and sales, including any cash sales. It’s fine to receive cash payments, so long as those are recorded and reported as income earned in GST and income tax returns.”
What to do if you are impacted?
This can be a very stressful time for taxpayers, and our team is ready to help any business that may face an unannounced visit. Don’t hesitate to get in touch to understand your rights as a taxpayer and to guide you through the process.
The post IRD to make Unannounced Tax Audit Visits appeared first on Generate Accounting.
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