For many business owners, receiving a letter from a tax authority immediately creates anxiety. The notice may mention unpaid taxes, missing records, an audit or an amount the company believes is incorrect.
The temptation is often to set it aside, especially when the business is short of cash or unsure how to respond. But ignoring a tax letter does not stop the process. Deadlines continue to run, penalties may accumulate and the company could lose its opportunity to challenge an incorrect assessment.
A tax letter does not automatically mean the authority is right. It does mean the business must understand the notice, examine its records and respond within the required period.
What Type of Tax Letter Did Your Business Receive?
The first step is to identify what the tax authority is asking for.
A business may receive:
- a request for documents;
- a notice of audit;
- a reminder about an unfiled return;
- a tax assessment;
- a demand for payment;
- a request to explain figures reported in its accounts.
These notices do not carry the same meaning or require the same response.
A request for documents may only require the business to submit invoices, bank statements or previous tax returns. A notice of assessment means the authority has calculated what it believes the business owes.
A demand notice usually indicates that the tax authority expects payment and may begin enforcement if the business fails to respond.
Before taking any action, the company should check the tax period, amount, response deadline, reference number and the authority that issued the letter.
Why the 30-Day Deadline Matters
Under Section 41 of the Nigeria Tax Administration Act 2025, a taxpayer who disagrees with an assessment generally has 30 days from the date the notice was served to submit a written objection.
A valid objection should identify the disputed issues, the errors the business believes were made, the amounts involved and the changes it wants the authority to make. It should also provide documents supporting the company’s position.
The business must pay any part of the assessment that it does not dispute while the contested amount is being reviewed.
Missing the deadline could make the assessment harder to challenge and leave the tax authority free to proceed with collection.
Nigeria’s new tax framework took effect from January 1, 2026. However, liabilities, assessments, audits and disputes relating to earlier periods will generally be handled under the laws that applied before the new framework began.
Businesses must therefore confirm which legal regime applies to the tax period mentioned in the letter.
Why the Tax Authority’s Figure May Be Wrong
Tax authorities may calculate an assessment using previous returns, bank transactions, third-party information or estimates of the company’s income.
But money entering a business account is not always sales revenue.
Some deposits may represent:
- capital introduced by the owner;
- business loans;
- refunds;
- transfers between company accounts;
- money collected on behalf of another business;
- deposits that were later reversed.
The problem is that without proper records, the business may struggle to prove the difference.
A company disputing an assessment should compare the tax authority’s figures with its bank statements, invoices, receipts, payroll records, VAT filings, previous returns and evidence of tax payments.
Simply stating that the assessment is wrong will not be enough. The business must identify the error and support its argument with records.
How Ignoring the Letter Can Increase the Bill
Delaying a response can turn a manageable tax issue into a serious cash-flow problem.
Under Section 65 of the Nigeria Tax Administration Act, unpaid tax may attract a penalty equal to 10 per cent of the amount owed.
For naira-denominated tax debts, interest may also apply at the prevailing Central Bank of Nigeria Monetary Policy Rate, plus an additional spread determined by the finance minister. The tax authority may begin enforcement where payment is not made within 30 days after a demand notice is served.
For an SME already dealing with high operating costs, the final expense may include:
- the original tax;
- penalties;
- interest;
- professional fees;
- the cost of rebuilding missing records;
- disruption caused by enforcement action.
Poor tax compliance can also affect the company’s ability to obtain a tax clearance certificate, apply for loans, bid for contracts or attract investors.
What Should the Business Do First?
The business should first confirm that the letter is genuine.
Check the company name, Tax ID, official email address, reference number and the issuing authority. Do not make payments through unfamiliar links or bank accounts without verifying the instructions through the authority’s official channels.
The Nigeria Revenue Service operates an official self-service portal where taxpayers can review assessments, make payments, track refunds and manage tax obligations.
The company should also record the date the letter was received. The envelope, courier record or email may help establish when the response period began.
The next step is to gather documents relating to the period under review, including:
- bank statements;
- sales invoices;
- expense receipts;
- payroll records;
- VAT records;
- withholding-tax credit notes;
- previous returns;
- evidence of earlier payments.
The response should be clear, factual and supported by documents. The company should also keep proof that it was submitted.
What If the Records Are Incomplete?
Missing records are not a reason to remain silent.
The business should contact the tax authority, explain which documents it is gathering and request additional time where the notice or applicable law allows it.
Any extension request should be made before the original deadline. The company should continue preparing its response until it receives written approval.
Incomplete records may also expose a wider problem in the company’s financial management.
Even a small business should be able to show:
- how much it earned;
- what it spent;
- what taxes it filed;
- what payments it made;
- which deposits were not business income.
Reliable bookkeeping gives the business a stronger position when dealing with tax authorities, banks, investors and potential partners.
When Should the Business Get Professional Help?
A business owner may handle a simple request for a missing receipt or return. More serious cases may require an accountant, tax adviser or lawyer.
Professional help becomes important when:
- the assessment is large;
- several tax years are involved;
- the records are incomplete;
- the deadline is close;
- the authority alleges undeclared income;
- the objection period has passed;
- enforcement action has started.
The adviser should review the assessment, identify the applicable law, prepare the objection and ensure that the business submits the correct documents.
What Businesses Should Know
A tax notice is not automatically a punishment. It may be a request for information, an audit notice or an assessment that the company can still challenge.
But silence reduces the business’s options.
The safest response is to open the letter immediately, identify what the authority wants, compare the figures with the company’s records and act before the deadline expires.
For businesses, the cost of professional advice at the beginning of a tax dispute is often far lower than the penalties, interest and enforcement costs that may follow months of inaction.
