IRD hardship and financial relief: who qualifies, and what companies can ask for

“IRD hardship” is one of the most searched phrases among business owners who are behind. It’s understandable. Hardship sounds like it should describe a business that’s struggling. But in IRD’s rules, serious hardship has a specific meaning and a specific audience, and most companies fall outside it. Knowing that early saves time and disappointment.

Who can apply for serious hardship relief?

Only individuals. IRD’s Standard Practice Statement 18/04, which sets out its options for relief, explains that serious hardship relief applies to natural persons (SPS 18/04). Broadly, it’s about whether paying the tax would leave a person unable to meet minimum living expenses, pay for medical treatment or cover similar essentials.

That means a sole trader can apply, because a sole trader’s tax debt is personal. See sole trader IRD debt. A company can’t.

What can a company ask for?

Companies, partnerships and trusts can apply to IRD for financial relief or instalment support using IRD’s online application (IRD). The form asks for:

• the current value of assets and liabilities;
• the position of the shareholder current account, if a company;
• what events or circumstances are stopping you from repaying;
• whether the entity has already tried borrowing to pay the debt (IRD asks this directly); and
• details such as any bright-line losses carried forward.

You can upload a 12-month cash flow forecast (IR591) as supporting evidence. It’s optional, but it’s often what turns a vague request into one IRD can say yes to. Our IR591 guide explains how to fill it in.

When will IRD write off company tax debt?

Rarely, and on narrow grounds. Under SPS 18/04, a company’s tax can be written off where it’s irrecoverable, where recovering it would be an inefficient use of IRD’s resources, or after liquidation. That’s a long way from the “write-off” some advertising implies. For more, see IRD debt write-off.

Separately, IRD can remit penalties in certain situations, for example where an event beyond your control caused the late payment. That’s a different process. See penalty remission.

Why does IRD ask about loans?

Because IRD’s job is to collect the most it reasonably can over time. If funding is available to pay the debt, IRD will expect you to look at it before agreeing to relief. The question on the form isn’t a trap. It’s an honest signal: looking into a loan is part of doing this properly.

You can answer it in one of three ways, and each is fine if it’s true:

1. We applied and were approved, and here’s how we’ll use it.
2. We applied and were declined, for this reason.
3. We’ve looked at funding and it would leave the business worse off, because of these numbers.

Need an answer for IRD’s “tried getting a loan” question? Ask us for a clear, honest assessment. No credit check to enquire.

What makes a relief or instalment application stronger?

Include	Why
All returns filed	IRD can’t assess relief on an unknown balance
A realistic IR591 forecast	Shows what you can actually pay
Proof current tax is paid	Shows the debt won’t keep growing
A clear explanation of the cause	Gives IRD context for its decision
Evidence about funding	Answers the loan question honestly
Details of the current account	Required for companies, and often scrutinised

What about the shareholder current account?

If a company’s shareholders have drawn more than they’ve put in, the current account is overdrawn, and that’s effectively money owed to the company. IRD asks about it for a reason: a company asking for relief while its owners owe it money is likely to be asked to collect that money first. If you’re considering liquidation instead, the same issue arises, because a liquidator can pursue an overdrawn current account. See guarantees and current accounts.

An illustrative example

Illustrative only. Not a real client and not an offer.

A Nelson tourism company owes IRD about $62,000 after a poor season. The directors assumed they’d qualify for hardship. Their accountant explains that companies can’t use serious hardship relief, and helps them apply for instalment support instead. The form asks whether they tried getting a loan. They ask us; a cash-flow loan could clear $30,000. They take it, attach an IR591 forecast, and propose a seven-month plan for the remaining $32,000, which IRD accepts.

Be wary of promised outcomes

Some paid advisers advertise large write-offs. Ask any adviser for their fees in writing and their qualifications, and be cautious of guarantees. IRD decides relief, not the adviser, and companies can’t use serious hardship. Our warning signs checklist lists what to watch for.

How long does IRD take to decide?

It varies with the complexity of the application and how complete it is. Collection action doesn’t necessarily stop while IRD considers it, so keep engaging and keep new tax current in the meantime. If you have a hard deadline, such as a statutory demand, don’t rely on a pending application to protect you; talk to a lawyer about the deadline and look at whether the debt can be paid in full in time.

Talk to us before you apply

If you’re preparing a relief or instalment application, send us a short enquiry. It costs nothing and doesn’t touch your credit file, your details aren’t circulated to other lenders, and a real person will give you a straight answer about what funding is available. Accurate details of the debt, your assets and any property help us give you an answer you can put in front of IRD.