How we Negotiated Away $204,000 in IRD Debt
Original tax debt can quickly get out of control with the accruing interest and penalty fees. This may result in the debtor becoming insolvent and facing bankruptcy (for individual debtors) or liquidation (for companies) proceedings commenced by the Inland Revenue Department (“IRD”).
At Norling Law, we have extensive experience negotiating settlements with the IRD. The settlement with the IRD could be in the form of a provisional payment plan and/or partial principal debt/interest/penalties write-off. When faced with a settlement proposal, the IRD has a set of requirements that they must consider. At Norling Law, we take these requirements into account when formulating a settlement proposal.
In the event the debtor is not in a position to settle the debt, we can provide advice on other alternatives to bankruptcy and liquidations. The sooner the issue with the outstanding debt is addressed, the more options could be available.
Below we set out a recent example of negotiations conducted by us on behalf of a client, which resulted in a significant write-off of the client’s debt to the IRD.
Our client was in significant arrears with the IRD, amounting to approximately $260,000. This particular client, due to unforeseen circumstances, failed to meet its tax obligations over a period of approximately 4 years.
Our client came to Norling Law for assistance when the IRD had served it with liquidation proceeding and there was a hearing date scheduled in the High Court.
First, we explained the consequences of liquidation and provided our client with general insolvency advice. We also provided an outline of various steps and timelines that would take place in the liquidation proceeding, which helped to reduce the client’s stress levels.
We also interviewed our client and each director and explored:
- the personal and financial circumstances they were experiencing at the time of non-payment;
- the ability to settlement;
- the steps they have taken to restructure the management of the company in order to prevent future non-payments; and
- other matters relevant for an application for financial hardship.
We then conducted negotiations with the IRD on behalf of the client focussing on these four areas. The outcome was an astounding $204,000 reduction in the tax payable. Our client was able to avoid liquidation and resolve the matter entirely by paying a lump sum of $20,000 and the balance of $36,000 in monthly installments over a period of 3 years.
Our client could draw a line in the sand and move on with business free of the stress of having outstanding arrears with the IRD and the threat of liquidation.
Whether a reduction of the debt owed to the IRD could be achieved would depend on various circumstances associated with the non-payment of tax, position of the debtor and etc.
If you would like further information in relation to negotiating a settlement of your outstanding tax debt with IRD, contact the team at Norling Law at info@norlinglaw.co.nz or you can book a consultation here: https://norlinglaw.co.nz/consultation-brent/
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.
Wendy has over 20 years’ experience in civil litigation in New Zealand with a main focus on construction, insolvency and debt recovery and security enforcement.