Can't pay IRD? Your options as a company director

If your company has fallen behind on PAYE or GST, you are not alone, and you are not out of options. Tax arrears are one of the most common first signs that a business is under pressure, and we speak with directors in exactly this position every week. The single most important thing to know is this: the earlier you act, the more options you keep open. A conversation with us is free and confidential, and it does not put your company into liquidation.

Why IRD arrears matter more than most debts

PAYE and GST are different from ordinary trading debts. In practical terms they are money the company has collected or deducted on behalf of others - your employees' tax and your customers' GST - rather than money that ever really belonged to the business. That is why falling behind on them is treated seriously, and why it is often the clearest early warning that cashflow is genuinely short rather than just tight.

Arrears also do not stand still. Penalties and use-of-money interest are added over time, so a debt that felt manageable can compound into something much larger while you are trying to trade your way out of it. And Inland Revenue is one of the most active enforcement creditors in New Zealand - in many liquidations we see, IRD is the creditor that eventually applied to the court. None of this is said to alarm you. It is said because understanding why the debt matters is the first step in dealing with it properly.

Your realistic options, honestly

There is rarely a single right answer, but the realistic options usually fall into three groups.

1. Talk to IRD early

Inland Revenue has established processes for instalment arrangements, and in our experience it generally prefers engagement over enforcement. A company that approaches IRD early, with honest numbers and a realistic proposal, is in a far better position than one that goes quiet and hopes the letters stop. An arrangement has to be one the company can actually keep - agreeing to payments you cannot make usually makes things worse - which is why it pays to understand your true position first.

2. Look hard at whether the business is viable

If the underlying business is sound and the tax debt is the symptom of a temporary problem, there may be a genuine path through: a turnaround plan, restructuring costs, or a formal creditors compromise that binds creditors to a realistic repayment proposal. We will help you test that honestly, because a rescue only works if the numbers support it.

3. If the business is not viable, stop the hole getting deeper

Where the company cannot realistically recover, the responsible course is usually a formal process - voluntary administration where a rescue or better outcome for creditors may still be achievable, or an orderly liquidation where it is not. That is a hard conclusion to reach about your own business, but it stops the debt compounding, brings certainty, and is very often the step that lets directors finally sleep at night.

A word about your duties as a director

Directors have duties under the Companies Act 1993, and continuing to trade while a company is insolvent - taking on new obligations you know it may not be able to meet - can in some circumstances create personal exposure. This is not a reason to panic; it is a reason to take advice early. Directors who face the problem, get advice and document their decisions are in a much stronger position than those who wait. You can read more on our for directors page.

Common questions

Will IRD accept a payment plan?

Often, yes. Instalment arrangements exist for exactly this situation, and IRD generally responds better to early, realistic engagement than to silence. It is not automatic, and the proposal has to be affordable, but approaching IRD early keeps that door open.

Does calling you mean liquidation?

No. A first conversation is simply advice - confidential, free and without obligation. It starts no formal process. We set out the realistic options and the decision about what happens next remains yours.

What does the first conversation cost?

Nothing. The first conversation is free and confidential, and we will give you an honest view of where things stand and what the sensible next steps look like.

This guide is general information only and does not constitute legal, financial or insolvency advice. Every company's situation is different, so please take advice on your specific circumstances before acting.