Many taxpayers are unaware of the IRD’s Tax Pooling Service. In a somewhat surprising shift (given their enthusiasm for charging interest and penalties!) it allows taxpayers to reduce their exposure to interest and penalty costs.

Taxpayers can place their provisional tax payments in a pool account held at the IRD and the amounts in the pool are held on trust by an independent trustee. The company operating the tax pool is called a “Tax Pool Intermediary.”

When it’s time to file your tax return, you’ll transfer what you need from your tax pool deposits and any surplus amounts are then able to be traded with other tax payers for improved interest returns.

Why do other taxpayers acquire those credits? Because buying somebody else’s surplus provisional tax extinguishes their liability to the IRD. Better still, it’s at a lower cost than IRD interest rates.

If you’re struggling to pay your tax, tax pooling has two advantages: first, the interest charged by the tax pool intermediary is less than what the IRD would charge. Secondly, no penalties are charged because the tax is treated as paid on the date it fell due.

In summary, in return for a very reasonable rate of interest, tax pooling means you can pay your tax late but without incurring penalties.

Talk to us about arranging tax pooling.