Daisy-chaining means you could be investigated too!The 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.