How to read a KRA assessment letter line by line

A letter from KRA with the word "assessment" or "demand" in the heading is enough to ruin an afternoon. The first reaction is often panic or avoidance, and both are expensive. The letter is a document with a structure, and once you know how to read it, you can decide calmly what to do. This guide walks through the usual parts. It is general information, not legal advice.

Start with who, what and when

At the top you will find your name, PIN, the date of the letter and a reference number. Check that the PIN and name are yours; mistakes happen, and a letter meant for someone else should be returned with a note. Write down the date you received it, because deadlines run from that date or from the date on the letter, and the letter will say which.

Identify the tax and the period

The letter will name the tax involved, such as income tax, PAYE or VAT, and the period it covers. Work out what you filed for that period. Pull out your return, your payments and your iTax ledger; how to read your iTax ledger and statement of account will help. Many assessments arise because a payment was not matched to the right period.

Understand how the figures are built

An assessment normally shows three layers: the principal tax said to be due, the penalties and the interest. Penalties and interest grow with time, so the total can be much higher than the tax alone. Break the amount into those three and check each separately. KRA penalties and interest explained shows how they are calculated, and the KRA penalty calculator lets you test the figures.

Find the reason for the assessment

The letter should explain why KRA believes more tax is due: a difference between your return and third-party data, an unfiled return, an expense disallowed, income not declared or a mismatch in VAT. If the reason is not clear, that is the first thing to ask. You cannot respond well to a charge you do not understand.

Check the deadlines

Look for the date by which you must pay, respond or object. The period to object is strict, so note it prominently. How to object to a KRA assessment and appeal explains the process and the time limits. If you need more time to gather documents, ask in writing before the deadline expires.

Compare with your records

Now test the claim. Does the income match what you declared? Are the expenses disallowed ones you can support? Is the VAT figure consistent with your invoices? Use your own records, such as the tax records checklist and document log and the supporting papers behind the return. Where KRA is right, accept it. Where it is wrong, you will need evidence.

Decide your response

You usually have three options. First, pay, if the assessment is correct. Second, query it, if something looks like an error that can be fixed by explaining or amending a return. Third, object formally, if you disagree with the assessment. Often a mix is right: pay the undisputed part and object to the rest. If you cannot pay in full, ask about a payment plan, and see tax arrears and payment plan tracker for a way to record it.

Write your reply

Reply in writing, quoting the reference number and the tax period. State clearly what you agree with and what you dispute, give the reasons and attach the supporting documents. Keep it short and polite. Send it through the channel the letter specifies, and keep proof of delivery. Record every contact in the KRA correspondence and objections log.

Get help for large or complex cases

If the amount is significant, or the issue is technical, speak to a tax adviser. When to hire an accountant or tax agent lists the signs. A professional can often resolve in days what would take you weeks.

Prevent the next one

Most assessments can be avoided by filing on time, paying with the correct references and keeping records. After this one is resolved, review what went wrong and fix it. A little discipline now is cheaper than the next letter.

A calm first day

On the day the letter arrives, do three things only: read it fully, note the deadlines and file it with your records. Do not pay, reply or complain until you have checked the figures. Sleep on it if you can. A letter that looks frightening at night often turns out to be a matter of a payment applied to the wrong period when you look at it the next morning with your ledger beside you.