Unfortunately, when a company is struggling to keep up with its day-to-day obligations, often payment obligations to the IRD can escalate.
In this article, Brent Norling discusses the options a debtor has if they are not currently fulfilling their obligations to the IRD.
If your business has a large amount outstanding to the IRD, there are only two options. Either you be proactive in resolving the matter or you look to liquidate. If the business is worth saving some options can be taken, but only if you are willing to have the hard conversations to do so.
Sitting on your debts and hoping they will sort themselves out is not a strategy.
IRD debt isn’t just a number—it’s a reflection of the myriad challenges and setbacks that businesses and individuals face. Whether it’s due to unexpected downturns, personal hardships, or strategic missteps, the outcome is the same: a growing financial burden that can threaten the very survival of a business.
The first step in confronting IRD debt is a candid assessment of your business’s viability. This involves a hard look at whether the business can be salvaged without deepening insolvency or unfairly jeopardising creditor funds.
Proactive negotiation with the IRD is not just advisable; it’s essential. The IRD is more amenable to negotiation than many realise, offering possibilities for debt write-offs and structured payment plans tailored to individual circumstances.
Ignoring IRD debt is akin to steering a ship directly into a storm. The consequences of inaction are severe, with penalties that can escalate the debt to crippling levels.
Honesty and clarity with the IRD about the origins of your financial difficulties are critical. This transparency lays the groundwork for a constructive dialogue about potential solutions.
Demonstrating Change and Compliance
It’s crucial to show not just that you recognise the problem, but that you’ve taken concrete steps to address it. This might involve internal restructuring, financial planning, or operational changes aimed at ensuring future tax compliance.
A well-crafted proposal to the IRD should outline a realistic plan for clearing the debt, while also demonstrating the potential benefits to the IRD of agreeing to a negotiated settlement over the alternative of liquidation.
Engaging with the IRD at the earliest sign of trouble can significantly improve the chances of reaching a favourable resolution. Early communication signals a commitment to resolving the issue and can prevent the accrual of further penalties.
Given the complexities of tax law and the nuances of negotiation with the IRD, seeking professional advice can be a wise investment. Many advisors offer initial consultations at no charge, providing valuable insights into possible strategies for debt resolution.
Dealing with IRD debt is undoubtedly challenging, but it’s not insurmountable. With a strategy grounded in transparency, proactive negotiation, and clear communication, businesses can navigate these choppy waters and emerge stronger on the other side. The key is to recognise the seriousness of the situation early, engage openly with the IRD, and seek professional guidance to chart the most effective course forward.
If you find yourself in this situation and are ready to have a hard conversation, we offer a FREE 30-minute legal consult. Get in touch if you need help.
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
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