KEY POINTS:
For many small businesses 28 August is like a mini D Day. It's provisional tax day. As tax payments can be vital to your business success, it's important that you're aware of all of your options.
The deadline for provisional tax often comes at a bad time for small businesses, particularly those of you with irregular cash flows. Furthermore, do your calculations wrong and you could be facing hefty charges.
The IRD's introduction of provisional tax pooling, however, gives you greater flexibility when it comes to paying provisional tax. It does this by allowing taxpayers, working through a provisional tax intermediary, to pool provisional payments.
These intermediaries may also finance your provisional tax liability, paying the IRD on your behalf, and letting you repay this when you have the necessary funds.
In effect, it is like putting your tax on hire purchase, allowing you to:
- free up working capital
- reduce your finance costs
- reduce your risk of exposure to 'Use Off Money Interest' charges
Because the tax is excellent security, there is no credit approval process, and interest rates are considerably lower than the interest on an overdraft or loan, or the late payment penalties levied by the IRD.
This initiative also has the blessing of the IRD.
"Believe it or not, the IRD doesn't derive pleasure from charging late payment fees and chasing tax payments," says Kerry Brew, head of Provisional Tax Finance, one of three intermediaries listed on the IRD's website.
Tax Finance Facilities are typically available for any amount over $5,000 for periods from three months to 20 months.
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