The Business Advisory Blog

The Business Advisory Blog

Insight, news and updates from Alliott NZ Chartered Accountants, Auckland New Zealand. The views expressed here are the views of the author and should be discussed in further detail should an article be relevant to your individual circumstances.

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

Anthony McIlroy
Published on

Daisy-chaining means you could be investigated too!

we understand tradies-388-41The Inland Revenue have announced a focus on the cash economy particularly in the trade’s sector. You can read more about that here.

Interestingly they have announced that, as part of a wider campaign, there will be a particular focus on sub-contractors in Flatbush, Takanini, Silverdale and Albany.

For those reading this you may you think that you are fine, you haven’t been operating in those areas. However little ol' NZ with its two degrees of separation means it doesn’t take much to be pulled into an IRD investigation on a sub-contractor operating in South Auckland.

How is this so?

Well, when the Inland Revenue commence an audit they often look at relationships that person has had with others, both at a business and personal level. From this a daisy chain of audits can commence as the Inland Revenue start investigating those associates, if they find an issue with an associate they can then start drilling down into the relationships that associate has. As you can see it doesn’t take long before an investigation on a chippie in South Auckland that you don’t know daisy chains its way up to your electrical business in Warkworth!

As one of the largest government organisations it may not come as a surprise that the Inland Revenue have a lot of resource and history on what to look for. They know what margins should be achieved on a business working in the various sub-trades and they make no secrets about it, you can check them out here.

A variation in margin is picked up when the cost for materials and labour go through the books but there is no corresponding revenue which was obviously taken as cash.

This campaign will start with a hiss and a roar but will continue for some time as businesses file their tax returns throughout the rest of the year.
Do you know what your margins are like and how they compare against others in the industry? Does your accountant tell you this stuff? Do you think you might have an issue? Maybe it’s time for a chat? Call us at Alliott NZ today on 9 520 9200.
Need more help with your trade business? Read more at Helping you trade better

Topics: Audit Inland Revenue Department investigation IRD margins trade businesses