McDonald’s Wave Insolvency Practitioners Notice Increase in IRD Initiated Liquidation Appointments

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Debt collection actions are gaining momentum and liquidation proceedings are on the increase in New Zealand. There is an increase in liquidation proceedings initiated by the IRD.

Many New Zealand businesses have been affected by Covid-19 and are facing insolvency. Being insolvent means one of two things:

• Debts cannot be paid when due.

• Total debt is greater than the value of all assets.

The tax commissioner has stepped up debt collection actions. The CIR is able to issue a formal notice as a necessary step to advance proceedings against a company.

McDonald Vague Insolvency Practitioners recommend that any company struggling to settle its tax arrears that negotiations be entered into quickly to avoid possible liquidation proceedings.

Taxpayers are required to pay their tax in full and on time. Failure to comply with this instruction will result in late payment penalties and interest. These fees compensate the commissioner for the loss of use of the money and act as a deterrent to encourage taxpayers to pay the correct amount of tax on time.

If your company receives a formal request from the IRD, doing nothing is not an option. Inaction will limit your options and virtually guarantee insolvency. You may also be held personally liable for non-payment of PAYE.

In some situations, the Commissioner may be able to help taxpayers if they are unable to pay on time or if the imposition of penalties and/or interest is not appropriate. Depending on the circumstances, the Commissioner may also agree to write off or remit the amounts owing (so that they do not have to be paid), or agree to the taxpayer entering into an installment arrangement (so that the amount is paid over time rather than immediately).

IRD seeks open communication and is more willing to consider disbursement arrangements when directors have been candid from the outset.

The IRD may declare directors liable for tax on their company under general insolvency law.

Initially, the IRD will try to find a solution. If you reach an agreement for reimbursement, the IRD will not go any further.

If you are unable to find a compromise, the IRD will issue a formal notice, followed by a formal notice, then file a request for the liquidation of the company (liquidation procedure) if you do not settle the formal notice. notice. If you do nothing, the company will be put into judicial liquidation by the High Court.

Relief Options

The IRD offers relief options to businesses with viable operations and has supported businesses that have shown clear impacts of Covid-19 on their business.

Financial relief may be granted when a taxpayer cannot meet their payment obligations.

The Commissioner is open to installment arrangements for tax arrears.

The CIR may agree to collect amounts owed over a period of time through an installment arrangement, or not collect the amount owed (i.e., write off the amount), or a combination of the two options (i.e. write off some of the debt and enter into an installment agreement for the balance).

When an amount is deemed uncollectible, the Commissioner has the discretion to write it off.

One possibility for responding to the formal notice from the IRD is voluntary liquidation. This gives the director and shareholders a small element of control over the liquidation process. If liquidation is unavoidable, the ability to voluntarily appoint a liquidator is generally required within 10 business days of service of the liquidation proceedings in order to act quickly after legal request (or earlier) is advised.

If you do nothing or fail to reach a settlement, the IRD may request its preferred liquidator or official assignee and manage your affairs and liquidate your business. In this case, the Court will designate the liquidator of the IRD. As the business owner, you have less control over the process and must cooperate with the court-appointed liquidator or official assignee at all times.

Deciding between involuntary liquidation and voluntary liquidation may not seem like a choice. Appointing a licensed insolvency practitioner who you believe understands you, your business and your industry, and who can take your interests into account while meeting IRD requirements, provides greater certainty about the likely results. Your liquidator can apply specialized skills to take some of the sting out of this traumatic process.

If your business is experiencing financial difficulties, download free mcdonalds wave guide for new zealand businesses to explore your different options.

If the business has lost too much from the impact of Covid19 and the outlook is that the business has only minimal ability to repay creditors or a financial source to fall back on to offer a better position than what the liquidation reserves, then the earlier liquidation may be the best choice. Continuing to trade with knowledge of insolvency is a risk for directors.

If your business needs advice on restructuring options or is likely to face the prospect of liquidation, McDonald’s Wave will be happy to advise you on the process and the consequences.

See more at https://www.mvp.co.nz/articles/risk-management/ird-debt-collection-nz-companies-in-financial-distress

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