Imagine you are pulled over by a police officer and asked “were you speeding?”, however, your speedo is broken, so you’re actually not sure. That is how it can feel when Inland Revenue (IRD) notifies you of an audit or investigation. On the one hand you know it is ‘part and parcel’ of doing business, on the other hand it is the last thing you need.
From the outset, it is important to acknowledge that the person from IRD is a human being just doing their job. There shouldn’t be the need to stress or overthink the matter. But the process needs to be handled proactively and deliberately.
If a request for information is received, do not provide the information without first engaging with your accountant. Typically, an initial information request is from a template that is not tailored to a particular business, industry or taxpayer. Hence, the requests tend to ask for a large volume of information, some of which may be irrelevant or immaterial.
For your accountant, engaging with Inland Revenue is an ordinary part of the job and it happens more often than you would expect. It is quite normal to contact IRD in response to the request to agree on how to approach the process, timeframes, information to be provided and meeting times etc. All of which might not be in line with the first letter received. The purpose is not to be ‘restrictive’ or ‘difficult’, but instead, open and transparent with a view to ensuring the process is as fast and efficient as possible.
In practice, IRD are also very understanding of working around the needs of the business itself. For example, if the business is subject to seasonal activity or ‘month-end’ processes, IRD is typically willing to flex the process to try to minimise any disruption.
If there is an initial meeting with IRD, consider giving a ‘presentation’ on the business. This could cover the legal structure, physical business operations, locations, number of staff, and the accounting function. A clear understanding helps minimise the number of follow-up questions during the review process, enabling a more efficient process.
It is important to be clear and concise. If the answer to a question is not known, state that there is the need to look into the matter further. Allow your accountant to answer items (verbally or in writing) that are more ‘tax technical’ in nature.
All going well, nothing material is identified for adjustment and the process concludes with a ‘tick of approval’ and comfort that you were not ‘speeding’ after all.