If you're in the hospitality industry, you could be in for a visit from the taxman as part of their focus on the hidden economy.
The IRD is looking at targeting the hospitality and food industry to identify undeclared income and address the high number of overdue returns and payments.
We've already seen the department doing high-profile work with tradespeople.
While the IRD has some useful information on its website and recommends having good systems in place, there is one suggestion that made me cringe, that a simple spreadsheet can work just as well as a software package to manage tax obligations.
I'd have to disagree with that notion — put the time and effort into getting some software and train or pay someone to look at your systems, because the onus is on you to prove without doubt your income and expenses are correct.
Businesses with poor results will sell for less and have trouble borrowing money.
So can your business live up to the IRD's scrutiny? Here's some questions to ask yourself.
Do my till tapes or receipts match what's banked into the bank account? If there are differences such as over bankings or under banked income, are there notes explaining the differences?
Do I have invoices and receipts for my expenses and for those things purchased in cash, where has the cash come from to buy them? If it's sales, has it been correctly accounted for?
How are my margins year on year? Do they vary a lot and why is that? Do they vary compared to others in the industry? This is one indicator that can alert the IRD to unbanked income.
Are all my staff on the books and are they taxed correctly?
Get some help and if you have something to confess, a voluntary disclosure to the IRD will see a reduction in penalties.
Jeremy Tauri is an associate at Plus Chartered Accountants.