Provisional tax for SMEs worth consideration

“Labour's announcement of a new option to pay provisional tax for small and medium business is an idea worth considering,” says Mr Geof Nightingale, PwC Tax and Private Business Leader.

“The option, dubbed Flexible Tax for Business by Labour, will allow a business to nominate a withholding tax rate based on their estimated taxable profit. If they do that, late payment penalties will no longer apply and the safe harbour where they are not exposed to interest on provisional tax underpayments will be significantly increased.

“While tax pools have assisted businesses manage provisional tax for a decade now, this idea would provide another sensible option to take the sting out of getting provisional tax wrong.

“This idea is likely to be capable of implementing in some form even before Inland Revenue completes its current business transformation. Once Inland Revenue’s business transformation is complete, the Flexible Tax for Business can likely be improved and extended even further,” concludes Mr Nightingale.

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