Seeing Inland Revenue on an envelope or in your inbox can be unsettling, particularly when the correspondence relates to a review, information request or potential audit.
But receiving a letter from Inland Revenue doesn’t automatically mean you’ve done something wrong.
IRD contacts taxpayers for many reasons. What matters is understanding why you’ve been contacted, what information is being requested and what you need to do next.
We asked Tim Chaw Partner and Director at Rodgers & Co for his advice on dealing with ‘letters from IRD’.
If a client receives an unexpected letter or information request from IRD, at what point would you recommend they contact their accountant?
Immediately.
Even if the request appears straightforward, it’s important to understand what IRD is actually asking, the underlying issue they may be investigating, and how best to respond.
Early involvement often helps.
Do you see situations where businesses inadvertently make an IRD enquiry more difficult by responding themselves?
Yes.
Business owners naturally want to be helpful and respond quickly, but in doing so they can sometimes provide incomplete information, inconsistencies or unnecessary commentary that creates further questions.
Having an adviser involved from the start can help ensure responses are accurate, concise and properly supported.
When a client brings an IRD letter or enquiry to you, what are the first things you look at?
We generally look at:
- The specific issue IRD is focusing on.
- The time periods involved.
- The information being requested.
- Filing history and tax positions previously taken.
- Whether there are any areas of risk that require further investigation.
From there we can develop a strategy for responding and gathering supporting documentation.
If someone has just received an unexpected letter from IRD, what are the first three things you would advise them to do?
- Don’t panic.
- Read the letter carefully and note any deadlines.
- Contact your accountant before responding.
The biggest mistake is often rushing into a response without first understanding the issue.
Without identifying the client, is there a recent property development or IRD matter you've dealt with that would make a useful example?
One recent matter involved a property-related risk review where Inland Revenue requested extensive information regarding development activities and the tax treatment adopted.
The client had maintained good records and sought advice early, which meant we were able to quickly assemble the required information, explain the commercial rationale behind the transactions and work constructively with Inland Revenue throughout the review process.
The matter reinforced the importance of documentation, proactive planning and obtaining specialist advice before significant transactions occur.
Received correspondence from Inland Revenue?
Before responding, talk to Rodgers & Co. We can review what Inland Revenue is asking, identify the underlying tax issues and help you prepare an accurate, properly supported response.
