• If you are about to start a business get professional advice on whether to trade as a sole trader, company, partnership etc.
  • Business profits can only be split between partners, shareholders etc based on actual work done, not based on shareholding or at artificial levels.
  • If you use part of your home for business you may be able to claim a portion of your homes expenses – whether rented or owned. See Using your home for the business (Claiming business expenses)
  • If you use a motor vehicle you must keep a logbook for 3 months every 3 years to ascertain the percentage of work use. Failure to keep a log book may mean that your vehicle expenditure is limited to 25%. Use of a private vehicle can be claimed by using a mileage rate, actual expenses or 25% of vehicle costs. If vehicle is in the name of a company, there are Fringe Benefit issues that will require further review.
  • If you have business loans as well as private loans, ensure that the business loans are interest only and any principal is paid off private loans.

 

 

Inland Revenue

  • Inland Revenue’s mission is to administer the tax laws and to ensure that people pay the correct amount of tax. So if you are audited it could mean that errors detected are in your favour. 
  • Inland Revenue are human. You should treat Inland Revenue officers like Police Officers. Rude and argumentative interactions do not foster a good relationship.
  • Inland Revenue is probably one few creditors that may write off unpaid debts. There are several factors to be considered before Inland Revenue would contemplate this such as tax compliance history, reason for the debt, assets and your ability to pay without causing serious hardship. Usually, a tax write off is only given once. 
  • It is your responsibility to file tax returns and to correctly calculate the amount of tax payable. If Inland Revenue identify any discrepancies you may be charged interest on the overdue tax, late payment penalties and also shortfall penalties if the errors made were careless, reckless or blatant tax evasion. In severe cases Inland Revenue may also take legal action
  • If you discover that you have made an error in your tax returns by omitting income or expenses are incorrect, it is wise to make a “Voluntary Disclosure” to Inland Revenue. Penalties and interest can be significantly reduced in these cases.
  • You must file any returns due regardless of whether you can afford to pay them. This stops any late filing penalty being imposed and also gives you the ability to pay off your tax bill by arrangement in instalments.