Corporates Contact - 2003

Issue 17 March 2003

• Max on tax
• Services Sector profile
• 2002 income tax returns due
• Credits on statements of account
• End-of-year issues for employers
• FBTnews
• Imputation account balances
• New legislation affecting company income tax refunds
• New and recently-updated publications

Max on tax

The year is well under way in the tax industry. We continue to help businesses with tax issues and conduct audits. There are various legislative changes looming which will challenge all of us.

One thing we have been doing is calculating the effective tax rates for various larger corporates. That is, what the group taxable income is, relative to the group accounting profits and what adjustments are made from accounting profits to taxable income. We have a particular focus on analysing those cases where the group rate is below 30%. In theory, we should be devoting more of our audit resources to those groups below the 30% rate where there is no obvious reason for the low group rate. You may wish to have a look at your group rate.

In the December 2002 edition I said that I would be telling my staff to take a tougher line with all income tax returns not filed by 31 March. We are not permitted by law to allow an extension-of-time beyond 31 March, so please make sure all returns are filed by then.

Planning is under way to have Corporates assist with binding rulings. This will be phased in over several years.

I have started my visits to larger corporates again. I am keen to see if we are meeting your expectations and how we may help you further. Tony Bouzaid, Manager Specialist Business, Corporates will also be making visits. So far the initiative has received a favourable response. Of course, if there is something you wish to raise now, please contact me by email or letter.

Max Carr
National Manager Corporates
max.carr@ird.govt.nz

Services Sector profile

Is your business activity in one of the following industry groupings?

• Advertising
• Casinos
• Computer and software manufacture and/or distribution
• Land, sea and air transportation
• Motor vehicle assemblers and/or distributors
• Newspapers
• Pharmaceuticals
• Property holding
• Retail and wholesale
• Television and radio
• Telecommunications
• Tourism and hotels

If it is, you need to know who to contact in Corporates for assistance, whether it is about filing a routine tax return or the possible tax consequences of a new business venture.

The Services Sector administers the tax compliance requirements and interests of these industry groups, and is located in the Auckland CBD, with some staff in other centres around New Zealand. The Services Sector aims to optimise future compliance by sector industry groups and to provide excellent customer service and assistance to them.

Are you concerned about a missing or an incorrectly completed tax return? The account manager in Business Services assigned to your company will help you with maintaining your tax account and attending to technical correspondence. Another account manager, the taxation and audit manager, will coordinate compliance audit procedures and provide assistance on technical interpretations. Both account managers are available to advise and assist you. If you have further queries, please contact the Services Sector Manager, who will be pleased to help you.

Contact details for Services Sector:

Manager

Mark Bell
Phone 09 367 1321
Email mark.bell@ird.govt.nz

Acting Team Leader, Business Services

Marilyn Fong Phone 09 367 1336
Email marilyn.fong@ird.govt.nz

Postal address

PO Box 5542
Wellesley Street
Auckland

Fax 09 377 1159

You can also contact us on the following general telephone numbers:

Employer enquiries 0800 443 553 or 04 381 9433
Other enquiries 0800 443 773 or 04 470 7577

2002 income tax returns due

For those of you with a tax agent taking care of your income tax returns, Monday 31 March 2003 is the last day for 2002 returns to be filed under Inland Revenue's extension-of-time arrangements.

If, due to exceptional circumstances, your return cannot be filed by that date, your tax agent should contact us in writing with the reasons and the estimated date of filing.

If your company is not linked to a tax agent, the return was due by the first provisional tax due date for 2003. Most 2002 returns not filed in these circumstances will now have incurred late filing penalties.

Irrespective of whether you have a tax agent or not, all 2002 returns should be filed now. If you have already incurred a late filing penalty for 2002, you need to be making arrangements for your 2003 return to be filed by your first provisional tax due date if you want your extension-of-time provisions to be reinstated for 2004 returns.

Please note that late filing penalties are graduated according to income.

Net income	Penalty
Less than $100,000	$50
$100,000 to $1 million	$250
More than $1 million	$500

If you have any concerns about your 2002/2003 returns, please phone your Business Services account manager or our enquiry line 0800 443 773.

Credits on statements of account

Many statements are regularly issued with credits on various return periods for differing tax types. These credits, especially for back years, appear to be ignored by many customers and companies. We would like your cooperation to clear these up.

While many of them are for a few cents, we are unable to write them off, because they are your money. If they are true credits, you can deduct them from your next payment for the same tax type, but please ring us first, so that we can make the adjustments immediately.

If they are not correct, please provide us with the details so we can correct them. This is especially important for child support, PAYE, student loans, specified super, non-resident withholding tax and resident withholding tax payments.

Income tax credit balances can also be refunded, or be transferred forward to tax in current years.

If the credit is the result of a GST offset (as the account was probably in "arrears" at some stage), the money should be transferred back to GST and refunded, or transferred forward and deducted off your next payment. This means the money is accounted for in the correct tax type.

Fringe benefit tax credits often arise because you have calculated your liability on the dollars and cents. If you use only the whole dollars, your payment and our assessment figure may match and avoid more small credits.

If a refund is requested, please explain how the credit arose. For example, a PAYE credit is not refundable if the reason is that someone was omitted from ir-File.

Please also provide your bank account details, so the refund can be direct credited to your account.

Amounts of $5 and less are considered uneconomic and are normally not refunded. If the particular tax type is still current, we would prefer you to phone us and transfer the credit to a current period.

For more help

If you have any concerns over items on your statements of account, or any credit balances, please phone either your account manager or our enquiry line on 0800 443 773.

If the credit is for child support, please phone your case officer or the employers' enquiry line on 0800 220 222.

End-of-year issues for employers

The financial year has all but finished for payment of wages and salaries to your staff. We will shortly be using the return information you have provided to issue summaries of earnings and personal tax summaries for the 2003 year. The total gross wages recorded by us is also transferred to ACC for your ACC invoice later in the year.

So are these records correct?

To avoid queries from your staff it may pay to consider the following before your last return and payment for the year.

• Are all withholding tax payments, directors' fees and redundancy payments recorded as earnings not liable for ACC?
  
  
• Have all earnings been recorded against an employee's IRD number?
  
  
• You cannot ir-File negative figures for staff members. To get the correction made, you need to complete an IR 344 form for the month the adjustment relates to. The top of the form must show the month and year for which the correction is required. If the adjustment results in a credit, please indicate whether it is to be refunded or transferred forward (specify to which tax type, month and year).
  
  Likewise, if the adjustment results in tax to pay, please indicate when payment was made, including penalties and interest.
  
  
• If your company ir-Files its own employer monthly schedules, please check that the final figures on them reconcile with the payments made, and IR 345 or IR 346 forms filed, before filing it through the internet. Please contact us if adjustments do need to be made.
  
  Alternatively, if you use a payroll bureau to ir-File, check the employer monthly schedule reports against your payments, and IR 345 or IR 346 forms. You will know immediately when something is wrong.
  
  
• The amounts returned on your IR 345 or IR 346 should always reflect the actual SSCWT liability and deductions from your employees for that pay period. If you want to make an adjustment, for example to take into account a credit held in a previous period, please attach a separate note and adjust your payment only.
  
  
• Any penalties charged are calculated on the amounts shown on your IR 345 or IR 346 less the payments received on time. If you have short paid and you pay the amount due within seven calendar days from the due date, you will incur an initial late payment penalty of 1%. If you still haven't paid after seven days, an additional 4% late payment penalty will also be charged.
  
  
• Please remember that adjustments for the 2003 year cannot be made on employer monthly schedules, or IR 345 or IR 346 forms filed for April 2003 or subsequent months (the 2004 year). All wages and salaries paid or credited to staff on or by 31 March 2003 must be included in the ir-File for March or for the 2003 financial year. Payments are due on 20 April 2003, or if you a large employer 5 April 2003.

Please advise us of all adjustments or corrections for the period 1 April 2002 to 31 March 2003 by 28 April 2003.

If you want to check your gross and/or PAYE year-to-date figures, please phone INFOexpress on 0800 257 777, your account manager or our enquiry line on 0800 443 773.

FBTnews

Some of you will have received the first edition of our quarterly FBTnews, which was included with FBT returns issued during December 2002 and January 2003. This newsletter, and the March edition are available on our website.

FBTnews was developed specifically for FBT filers after feedback indicated that Payroll News, which had included FBT items, was not always seen by the person dealing with FBT.

In FBTnews we intend to cover tax changes, due date reminders, returns completion, handy hints and topical issues relating to FBT.  December's FBTnews included items on recognising fringe benefits, filing nil returns, GST on fringe benefits and more.

The "GST on fringe benefits" article advises how to make adjustments for calculation errors. Often we can set a new due date for the payment of any further tax, which means that no late payment penalties are charged. Please note, however, that use-of-money interest (UOMI) will be charged from the original due date.

Imputation account balances

With 31 March 2003 approaching, now is a good time to check company imputation account balances.

If a company's imputation credit account balance is in debit at 31 March they will be required to pay further income tax equal to the debit balance and will also be charged imputation penalty tax.

The penalty tax can be avoided by paying income tax by 31 March, sufficient to clear the imputation account debit balance.

New legislation affecting company income tax refunds

In previous years delays have occurred in refunding overpaid income tax for companies around 31 March. A refund was often limited to the credit balance of a company's imputation credit account at the end of the most recently ended imputation year. For example, under previous legislation, if a 2002 income tax overpayment was being refunded on 2 April 2003, an imputation return to 31 March 2003 was required.

Now, if the imputation return for 2002 is filed by 31 March 2003, the 2002 imputation credit account balance will be used to determine whether the 2002 income tax overpayment can be refunded, no matter when the refund is being released.

The new legislation applies to refunds paid on or after 1 April 2002. More details on this change can be found in Tax Information Bulletin (TIB), Vol14, No11.

New and recently-updated publications

The following publications are available from our website or they can be ordered through INFOexpress.

Charitable organisations (IR255)
This booklet explains:

• what tax exemptions are available to charities and approved donee organisations, and
• the criteria an organisation must meet to get an exemption.

Entertainment expenses (IR268)
Sets out the entertainment deduction rules.

Putting your tax returns right (IR280)
This booklet (previously the IR 282) explains how taxpayers can correct problems with tax returns, including how to:

• correct minor errors in GST returns
• correct genuine errors such as arithmetic or transposition errors
• make a voluntary disclosure and its advantages.

Voluntary disclosure (IR281)
Use this form (previously the IR 282A) to make a voluntary disclosure.

Statement in support of a tax interpretation (IR282)
Use this form (previously the IR282B) to explain and support an interpretation or the tax position taken in determining the tax payable in a return.

Tax code declaration (IR330)
From 1 April 2003 a new version of the Tax code declaration (IR330) form will be introduced. We have made changes to the form to make it easier for employees to choose the right tax code. Also, a recent law change means that a statement has been included on the form to say the employee is entitled, under the Immigration Act 1987, to work for their employer.

Only new employees or existing employees who want to change their tax code need to complete the updated form.

Employers should receive a supply of the updated forms in mid-March 2003. Please dispose of stocks of previous versions of the form after 31 March 2003.

Conduit tax relief account return (IR406)
This is a new form that has been developed for dividend withholding payment companies that have elected to be a conduit tax relief company. This return must be completed and attached to the company's income tax return. If you need more information, please refer to Tax Information Bulletin (TIB) Vol 10, No 4.

2004 PAYE deduction tables
The new PAYE deduction tables for the 2004 year are now being sent out to employers.

These tables apply to any pay periods ending on or after 1 April 2003.

• Weekly and fortnightly PAYE deduction tables (IR340)
• Four-weekly and monthly PAYE deduction tables (IR341)

Additional copies of these tables will be available through INFOexpress from 10 March 2003.

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Date published: 06 Dec 2004

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