U1 Wages Reconciliation

This workpaper can be used to reconcile payments made to employees, contractors and other parties as payment for services rendered.

Payroll reconciliation

After completing the wages reconciliation workpaper (U2) you can reconcile the gross wages ledger. If you are not completing the U2 workpaper simply manually type the total gross wages returned to IRD in the box provided.

Enter any adjustments required to the schedule on the U2 workpaper in the table provided.

Enter details of any other reconciling items which were not subjected to PAYE in the ”Other reconciling items” table.

If any salaries or wages were paid to associated persons enter the applicable details on the table provided.

If any schedular payments were recorded in the PAYE schedules, enter these in the schedular payments table.

The IR10 will be populated with the gross remuneration paid to employees exclusive of schedular payments and payments to associated persons based on the data included on these tables.

Contractor payments

Some contractor and sub-contractor payments are subject to the schedular payment withholding tax rules, make sure you use the appropriate table.

In the schedular payment table, enter the account codes for payments made to contractors or sub-contractors for which withholding tax has been deducted.

Also enter details of the withholding tax rate used in respect of the account type. Check to determine if the correct withholding tax rate has been used.

If any schedular payments have been made to associated persons, enter these into the table below.

Where contractor or subcontractor has been paid with no withholding tax deducted, enter the account codes into the applicable table. Review the balances for any anomalies or if withholding tax should have been deducted.

If any contractor or subcontractor payments were made to associated persons, enter the details into the table below.

The total of all payments made to contractors or subcontractor less payments made to associated persons will be included on the IR10.

Professional and consulting fees

Professional fees include accounting, legal fees and taxation advice. Consulting fees include: management advice, financial advisory fees, assistance with feasibility studies, and advice concerning mergers, acquisitions, financing and restructuring. This expense categorisation includes all fees that have been expensed, but not capitalised to the balance sheet.

In the table provided enter the account code for professional and consulting fees which will populate the general ledger balances. Review balances for any anomalies.

Enter details of any payments made to associated persons in the table below. Indicate whether any of those payments had been coded to any of the accounts above.

The total amount of professional and consulting fees paid less any payments to associated persons will be recorded on the IR10.

Associated persons remuneration

For this expense, “associated persons” has the same meaning as in subpart YB of the Income Tax Act 2007. For more guidance please refer to A guide to associated persons definitions for income tax purposes (IR620).

“Associated persons” can include persons and entities, for example, individuals, companies, trustees, partnerships and limited partnerships.

The first table will automatically populate with any data included in the other sections of the workpaper. Check this looks reasonable and look for any anomalies. Have any other payments been made to associated persons which were not covered in the previous sections? If so enter the details in the table called “other payments made to associated persons”. Review for any anomalies.

The information from these two tables will populate in the A2 tax planning workpaper. When using the A2 tax planning workpaper to distribute profits. Any profits distributed to associated persons at that point will be populated on the bottom table. If the proposed distribution goes ahead you will need to create a journal entry to record this amount.

All payments to associated persons will form the basis of the IR10.

Review workpaper balances

Ensure that your workpapers balance using the balancing table at the bottom.