IRD Enquiry Letters: How to Reply and What to Prepare

At a glance

Form numbers, deadlines and procedures are as most recently published by the Inland Revenue Department.

First, work out which kind of letter you have

The urgency varies enormously, so identifying it is step one.

A general enquiry letter — asking you to explain or produce documents in relation to something reported. Usually with an explicit deadline.

A review letter — used by the IRD to confirm a company’s filing position. Not replying within the period may be taken as confirming that a return is still required, triggering what follows.

A notice of estimated assessment — you have not filed a return, so the IRD has estimated what you earned and assessed accordingly. This is the most urgent, because the objection period is only one month.

A field audit or investigation notice — the most serious, meaning the IRD intends to examine your accounts in depth. At this stage, get a professional involved immediately.

The reference and title at the head of the letter will tell you which. If you are not sure, treat it as urgent.

What to do in the first week

One: note the deadline and put it in the calendar. The most basic step and the most commonly missed. The period runs from the date of the letter, not the date you received it — so if it was delayed in the post, you have even less time than you think.

Two: check where the letter was sent. If it went to an old address and reached you indirectly, your registered office or business registration address needs updating, or you will keep missing things.

Three: pull the records for the relevant year. Establish which year of assessment the letter is about, then gather that year’s accounts, audit report, bank statements, contracts and receipts in one place.

Four: do not reply immediately. Answering before the material is complete makes it very easy to say something wrong or leave something out, and correcting it afterwards is harder work. Prepare properly within the period, then reply.

What happens if you don’t reply?

This is the part most people underestimate.

The IRD does not treat the matter as closed because you did not answer. It decides on the information it holds — generally against you, because it does not have your expenses and deductions.

The practical consequences can include:

• An estimated assessment (the estimate is usually higher than the reality)
• Additional tax
• The failure to file itself attracting a fine or even prosecution
• A tax position that is not clean, so you cannot get the notice of no objection when you later apply to deregister

And once the objection period on an estimated assessment has passed, even an obviously wrong figure is very hard to argue with. That is the most expensive part of not replying.

Received an estimated assessment — what has to happen within the month?

This deserves separate treatment, because the procedure differs from an ordinary reply.

An objection has to reach the IRD within the statutory period — posting it is not the same as it arriving, so do not leave it to the last day.

And if the estimated assessment was issued because no return was filed, the objection cannot simply be a letter saying “I disagree”. It has to be accompanied by the completed return and the relevant accounts — which means doing the accounts and the audit straight away.

That takes time. So the clock starts the moment the estimated assessment arrives.

Should I reply myself or instruct someone?

You can handle it yourself where a single year is involved, the question is specific (produce a particular receipt, explain a particular expense), the amount is small, and you have the material to hand.

Get a professional where:

• Several years of assessment are involved
• The amounts are significant
• What you received is a field audit or investigation notice
• The company has not filed for several years and has to catch up in one go
• Offshore income or a complex arrangement has to be characterised

The dividing line is not whether you can write a letter. It is whether the case will affect your tax position for years afterwards. What you say goes on the record, and it is hard to take back.

Do it well day to day and the letter holds no fear

Most enquiry letters are hard to answer because the receipts and accounts for that year have long since scattered. And an enquiry can reach back several years — if the records were not kept at the time, there is nothing to prove it with.

Conversely, for a company with complete accounts, kept receipts and returns filed on time every year, an enquiry letter usually means producing the documents and that is the end of it.

Want someone to work out what the letter is asking for and what to prepare? Talk to us.

This is general information and does not constitute tax or legal advice. Deadlines and procedures are as most recently published by the Inland Revenue Department and as stated in the letter itself; where a field audit, an investigation or a substantial amount is involved, advice from a tax professional is recommended.