Inland Revenue (IR) has issued ED0252, a draft standard practice statement (SPS), which covers how the Commissioner will address applications for requests to change balance dates. Approvals will usually be granted where, to name a few of the listed reasons:
- It can be demonstrated that the nature of the business makes a 31 March balance date impractical, or circumstances have changed significantly enough to permit a change to a non-standard balance date previously agreed to (this includes elections by new business customers to adopt a non-standard balance date, with application from their first return/tax year.
- It can be demonstrated that unreasonable or excessive compliance costs will be incurred as a consequence of having to return income to 31 March. This may include the impact of other statutory reporting requirements, such as where a customer is subject to a financial year other than 31 March due to another enactment.
- It is the adoption of an agreed industry balance date.
- It is to enable a shareholder-employee to use the same balance date as the company from which they derive their primary source of income; or,
- It is for a subsidiary company to use the same balance date as the parent company.
However, your request is unlikely to be approved if it is viewed by the Commissioners as simply enabling you to:
- Defer the payment of tax or take earlier advantage of a tax incentive or concession than would otherwise have been the case had no change of balance date occurred; or,
- Smooth out administrative workloads in the business (this does not include seasonal businesses wanting to adopt a balance date that is consistent with the natural end of their income year).
- The draft SPS goes into more detail about each of the potential reasons for which a taxpayer may request a change and also details how requests should be made (via myIR, telephone, or correspondence), depending on which reason is the basis for the change.
Finally, the draft SPS discusses the impact of a balance date change, primarily the transitional filing periods, which may range from six months to 18 months. Should you wish to make a submission on the ED0252 content, the closing date is May 3.
This article from the 'A Week in Review' newsletter was originally published Monday 25 March 2024. If you have any questions or would like a second opinion on any national or international tax issues, please contact me [email protected].?
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