The Inland Revenue Department (IRD) will often undertake an audit to examine your financial affairs, check you have paid the correct amount of tax, and determine that you are complying with the tax laws. So, what can you do to ensure an IRD audit goes smoothly? The following notes provide practical advice on the handling of income tax investigations and audits administered by the IRD.
Co-operation and control
It is most essential to be co-operative with the department and the investigator at all times while at the same time endeavouring to control an investigation as far as possible. There is always an uneasy trade-off between these two aspects, and if it comes to a decision, co-operation may be more important than control in order to reduce the time spent by the investigation team at your premises.
Responses
Clarity of responses is important. Ensure all queries are given careful consideration and very clear and concise answers are given to them.
It is normal procedure for an investigator to raise many questions even when the answers seem simple and apparent. Prior research is often done by the investigator. Answers given may well decide the future course of the investigation. For that reason, even relatively innocent questions, should be carefully examined and the answers cleared at a senior level with your organisation or with your adviser before any response is made.
Practical suggestions
- Ensure all of your taxation and financial records are complete and up-to-date
- Nominate a single liaison person to deal with the IRD to ensure consistency.
- Ensure the IRD does not have unlimited access to your records, staff and office space
- Be aware of which documents are subject to legal privilege
- Know your rights and be aware of the IRD’s wide powers
- Don’t panic
It is important that during an investigation, you have access to adequate advice on how to deal with the investigation and any matters which may arise. To optimise any assistance that your adviser may be able to provide, it will obviously be preferable for your adviser to be involved in the planning of the response to the investigator from the outset.
If you have been notified of an audit or if you wish to put your taxation affairs right before the IRD becomes involved, please contact any of the following people for advice or assistance:
Auckland:
David Dorrington - (09) 355 8301
Napier:
Giles Pearson - (06) 835 6144
New Plymouth:
Pauline Lockett - (06) 757 5477
Wellington:
Graham Archer - (04) 462 7271
Christchurch:
Paul Lynskey - (03) 374 3010
Dunedin:
Richard McKnight - (03) 477 8784
Also, the IRD have a brochure, Publication IR297 Inland Revenue Audits, (available via their
website) which you may find useful.
