In the previous article in our series, DIR’s Panoramic Reach: Tax Assessments and Audit Powers, we discussed how farback the Department of Inland Revenue (“DIR”) may go when assessing a taxpayer,the basis upon which an assessment must be calculated and what a notice ofassessment must contain.
But what happens when the taxpayer does not intend to object to the assessment and is willing to pay, but cannot pay the full amount immediately?
In this article we discuss the circumstances upon which a taxpayer has made the decision not to object to the DIR’s tax assessment.
A taxpayer must not concede to the tax assessment too quickly. Further, a taxpayer who has made the decision not to object must take special care to confirm that there is no basis to object. If, after careful review and advice, a taxpayer concludes there is no realistic basis to object, then the payment‑arrangement considerations below become central.
[Download a PDF version of this article here, Dealing with a DIR Tax Assessment: When a TaxpayerChooses to Pay Rather Than Object]
Can a taxpayer request additional time to pay?
The Value Added Tax Act (the “VAT Act”) allows a taxpayer to apply for additional time or another acceptable payment arrangement. However, obtaining additional time does not necessarily stop all of the financial consequences associated with the outstanding tax.
The VAT Act provides that a person assessed by the Comptroller may apply in writing for time to pay the assessed tax. Where good cause is shown, the Comptroller may:
This gives the Comptroller flexibility when dealing with taxpayers who intend to satisfy an assessment but may be unable to make a single immediate payment in full.
For example, depending on the circumstances and the Comptroller’s approval, another arrangement may take the form of an agreed payment schedule. This would allow the taxpayer to make payments over a period of time rather than paying the entire assessment at once.
The provision does not, however, give a taxpayer an automatic right to additional time or to pay by instalments. The taxpayer must apply in writing, demonstrate good cause and obtain the Comptroller’s written approval.
The VAT Act does not define “good cause” for the purposes of an application for extension of time to pay. Whether good cause has been shown will therefore likely depend on the facts presented to the Comptroller.
What does an extension of time or other arrangement typically include?
An extension of time or other payment arrangement does not stop interest from accruing on the tax that remains outstanding. Interest continues until the relevant tax is actually paid.
Accordingly, additional time may result in the increase of the taxpayer’s overall cost. The longer the assessed tax remains unpaid, the more interest may accrue.
A taxpayer should apply promptly, provide sufficient supporting information, propose realistic terms and obtain the Comptroller’s written approval. Most importantly, the taxpayer should understand that, even where additional time is granted, interest ordinarily continues to accrue until the outstanding tax is paid.
An alternative arrangement granted or made by the Comptroller may include the waiver of a fine.
[Download a PDF version of this article here, Dealing with a DIR Tax Assessment: When a TaxpayerChooses to Pay Rather Than Object]
Negotiating a realistic payment schedule
It is true that you cannot get “blood out of a stone,” but taxpayers should not assume that the payment schedule they think is reasonable will automatically be acceptable to the Comptroller.
Key points:
In short, while the VAT Act gives the Comptroller flexibility to grant time or make other arrangements, that flexibility is not unlimited. A well‑supported, realistic proposal—developed with experienced counsel—materially improves the chances of securing terms that allow the taxpayer to comply without jeopardising the business.
What comes next?
But what if the taxpayer believes the assessment is incorrect and does not intend simply to pay it?
In the next article in this series, we examine how a taxpayer may object to a VAT assessment and the important procedures and deadlines that apply, including the strict 30‑day objection period and the requirement to pay or provide acceptable security at the time of objection.
Authors
Download a PDF version of this article here, Dealing with a DIR Tax Assessment: When a TaxpayerChooses to Pay Rather Than Object
This article is for general information only and does not constitute legal advice. Specific situations should be discussed with qualified counsel.
In the previous article in our series, DIR’s Panoramic Reach: Tax Assessments and Audit Powers, we discussed how farback the Department of Inland Revenue (“DIR”) may go when assessing a taxpayer,the basis upon which an assessment must be calculated and what a notice ofassessment must contain.
But what happens when the taxpayer does not intend to object to the assessment and is willing to pay, but cannot pay the full amount immediately?
In this article we discuss the circumstances upon which a taxpayer has made the decision not to object to the DIR’s tax assessment.
A taxpayer must not concede to the tax assessment too quickly. Further, a taxpayer who has made the decision not to object must take special care to confirm that there is no basis to object. If, after careful review and advice, a taxpayer concludes there is no realistic basis to object, then the payment‑arrangement considerations below become central.
[Download a PDF version of this article here, Dealing with a DIR Tax Assessment: When a TaxpayerChooses to Pay Rather Than Object]
Can a taxpayer request additional time to pay?
The Value Added Tax Act (the “VAT Act”) allows a taxpayer to apply for additional time or another acceptable payment arrangement. However, obtaining additional time does not necessarily stop all of the financial consequences associated with the outstanding tax.
The VAT Act provides that a person assessed by the Comptroller may apply in writing for time to pay the assessed tax. Where good cause is shown, the Comptroller may:
This gives the Comptroller flexibility when dealing with taxpayers who intend to satisfy an assessment but may be unable to make a single immediate payment in full.
For example, depending on the circumstances and the Comptroller’s approval, another arrangement may take the form of an agreed payment schedule. This would allow the taxpayer to make payments over a period of time rather than paying the entire assessment at once.
The provision does not, however, give a taxpayer an automatic right to additional time or to pay by instalments. The taxpayer must apply in writing, demonstrate good cause and obtain the Comptroller’s written approval.
The VAT Act does not define “good cause” for the purposes of an application for extension of time to pay. Whether good cause has been shown will therefore likely depend on the facts presented to the Comptroller.
What does an extension of time or other arrangement typically include?
An extension of time or other payment arrangement does not stop interest from accruing on the tax that remains outstanding. Interest continues until the relevant tax is actually paid.
Accordingly, additional time may result in the increase of the taxpayer’s overall cost. The longer the assessed tax remains unpaid, the more interest may accrue.
A taxpayer should apply promptly, provide sufficient supporting information, propose realistic terms and obtain the Comptroller’s written approval. Most importantly, the taxpayer should understand that, even where additional time is granted, interest ordinarily continues to accrue until the outstanding tax is paid.
An alternative arrangement granted or made by the Comptroller may include the waiver of a fine.
[Download a PDF version of this article here, Dealing with a DIR Tax Assessment: When a TaxpayerChooses to Pay Rather Than Object]
Negotiating a realistic payment schedule
It is true that you cannot get “blood out of a stone,” but taxpayers should not assume that the payment schedule they think is reasonable will automatically be acceptable to the Comptroller.
Key points:
In short, while the VAT Act gives the Comptroller flexibility to grant time or make other arrangements, that flexibility is not unlimited. A well‑supported, realistic proposal—developed with experienced counsel—materially improves the chances of securing terms that allow the taxpayer to comply without jeopardising the business.
What comes next?
But what if the taxpayer believes the assessment is incorrect and does not intend simply to pay it?
In the next article in this series, we examine how a taxpayer may object to a VAT assessment and the important procedures and deadlines that apply, including the strict 30‑day objection period and the requirement to pay or provide acceptable security at the time of objection.
Authors
Download a PDF version of this article here, Dealing with a DIR Tax Assessment: When a TaxpayerChooses to Pay Rather Than Object
This article is for general information only and does not constitute legal advice. Specific situations should be discussed with qualified counsel.
In the previous article in our series, DIR’s Panoramic Reach: Tax Assessments and Audit Powers, we discussed how farback the Department of Inland Revenue (“DIR”) may go when assessing a taxpayer,the basis upon which an assessment must be calculated and what a notice ofassessment must contain.
But what happens when the taxpayer does not intend to object to the assessment and is willing to pay, but cannot pay the full amount immediately?
In this article we discuss the circumstances upon which a taxpayer has made the decision not to object to the DIR’s tax assessment.
A taxpayer must not concede to the tax assessment too quickly. Further, a taxpayer who has made the decision not to object must take special care to confirm that there is no basis to object. If, after careful review and advice, a taxpayer concludes there is no realistic basis to object, then the payment‑arrangement considerations below become central.
[Download a PDF version of this article here, Dealing with a DIR Tax Assessment: When a TaxpayerChooses to Pay Rather Than Object]
Can a taxpayer request additional time to pay?
The Value Added Tax Act (the “VAT Act”) allows a taxpayer to apply for additional time or another acceptable payment arrangement. However, obtaining additional time does not necessarily stop all of the financial consequences associated with the outstanding tax.
The VAT Act provides that a person assessed by the Comptroller may apply in writing for time to pay the assessed tax. Where good cause is shown, the Comptroller may:
This gives the Comptroller flexibility when dealing with taxpayers who intend to satisfy an assessment but may be unable to make a single immediate payment in full.
For example, depending on the circumstances and the Comptroller’s approval, another arrangement may take the form of an agreed payment schedule. This would allow the taxpayer to make payments over a period of time rather than paying the entire assessment at once.
The provision does not, however, give a taxpayer an automatic right to additional time or to pay by instalments. The taxpayer must apply in writing, demonstrate good cause and obtain the Comptroller’s written approval.
The VAT Act does not define “good cause” for the purposes of an application for extension of time to pay. Whether good cause has been shown will therefore likely depend on the facts presented to the Comptroller.
What does an extension of time or other arrangement typically include?
An extension of time or other payment arrangement does not stop interest from accruing on the tax that remains outstanding. Interest continues until the relevant tax is actually paid.
Accordingly, additional time may result in the increase of the taxpayer’s overall cost. The longer the assessed tax remains unpaid, the more interest may accrue.
A taxpayer should apply promptly, provide sufficient supporting information, propose realistic terms and obtain the Comptroller’s written approval. Most importantly, the taxpayer should understand that, even where additional time is granted, interest ordinarily continues to accrue until the outstanding tax is paid.
An alternative arrangement granted or made by the Comptroller may include the waiver of a fine.
[Download a PDF version of this article here, Dealing with a DIR Tax Assessment: When a TaxpayerChooses to Pay Rather Than Object]
Negotiating a realistic payment schedule
It is true that you cannot get “blood out of a stone,” but taxpayers should not assume that the payment schedule they think is reasonable will automatically be acceptable to the Comptroller.
Key points:
In short, while the VAT Act gives the Comptroller flexibility to grant time or make other arrangements, that flexibility is not unlimited. A well‑supported, realistic proposal—developed with experienced counsel—materially improves the chances of securing terms that allow the taxpayer to comply without jeopardising the business.
What comes next?
But what if the taxpayer believes the assessment is incorrect and does not intend simply to pay it?
In the next article in this series, we examine how a taxpayer may object to a VAT assessment and the important procedures and deadlines that apply, including the strict 30‑day objection period and the requirement to pay or provide acceptable security at the time of objection.
Authors
Download a PDF version of this article here, Dealing with a DIR Tax Assessment: When a TaxpayerChooses to Pay Rather Than Object
This article is for general information only and does not constitute legal advice. Specific situations should be discussed with qualified counsel.
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