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Reply To: As a sole trader, my lump sum wage subsidy is treated as “other income” in a tax return rather than as wages/PAYE. I have just been advised by IRD in writing that because I received it in March it must be declared as income in the 2019/20 tax year. As background I applied for this based on a projected significant downturn in business from April onwards. I applied on 24 March and it was paid to me on 27 March. This treatment seems very onerous on sole traders. If I had known I would have waited until April to apply as this extra tax would have been far easier to deal with if it was apportioned over the 12 weeks it represents or from 1 April 2020. I wonder whether this income tax timing issue which seems to be an ‘unintended consequence’ for sole traders in particular can be challenged or whether anyone has advice on this?

Hey John, I sought some guidance from the IRD on your point – this is what they have said back to me, and they will also post this onto their website for guidance with an example: “We have determined that it is compensation in terms of section CG 5B of Income Tax Act which clarifies common law principle that business taxpayers return income on an accrual basis not on a cash received basis. We have taken an easy to follow approach for the self-employed that allows them to apportion it over the 12 week period. So subsidy was received on 26 March then 6/84ths of payment would be returned in 2020 and balance in 2021. We have prepared an example of this for website which will hopefully be posted soon.”

I hope that is more helpful. Andy