IRD is cracking down on contractor tax compliance — is your business covered?
Inland Revenue has just issued a new Revenue Alert, and while it's aimed squarely at the horticultural sector, the underlying issue is one that touches a lot more rural and commercial businesses than you might think: how you're handling payments to contractors.
If your business pays contractors for labour — whether that's on the land, on a building site, or anywhere else — it's worth a few minutes to make sure you're across your obligations.
What's changed
IRD says it's seeing a rise in a few problem practices, including businesses not withholding tax correctly from payments to contractors, complex subcontracting arrangements being used to obscure who actually did the work, and workers being paid in cash off the books.
None of this is new territory for IRD, but they've signalled they're increasing scrutiny — more investigations, closer checks on new GST registrations, and a harder line on outstanding debt in this space.
Why this matters even if you're not in horticulture
The rules IRD is talking about — schedular payments and withholding tax for contractors — aren't limited to orchards and vineyards. Plenty of rural and commercial businesses use contractors for labour, and the same basic obligation applies: if you're the one paying, you may need to be the one withholding tax, regardless of whether the contractor is an individual or a company.
It's an easy thing to get wrong, especially if a contracting arrangement has changed hands a few times or involves subcontractors you haven't dealt with directly before.
What to check
A few practical things worth a second look:
- Do you have a current IR330C (Tax Rate Notification for Contractors) on file for everyone you're paying as a contractor?
- Are you confident about who's actually withholding tax in the chain, especially where subcontracting is involved?
- Are your records — invoices, certificates of exemption, tax rate notifications — filed and kept for the required period?
If any of that feels uncertain, it's worth sorting out sooner rather than later. Getting it right from here is a much better position to be in than trying to unpick it later.
We're on your team for this
This is exactly the kind of thing we're happy to talk through with you — not to alarm you, just to make sure your business is on solid ground. If you'd like a second pair of eyes on how you're handling contractor payments, get in touch or book a complimentary review meeting with Shannon.