NZ Supreme Court grants leave to appeal from decision that receiver liable to pay GST; AAT decision on enterprise

In Richard Grant Simpson and Timothy Wilson Downes as Receivers v Commissioner of Inland Revenue [2012] NZSC 62 the New Zealand Supreme Court yesterday granted leave to appeal from the decision of the Court of Appeal in Simpson v Commissioner of Inland Revenue [2012] NZCA 126.  The Court of Appeal allowed an appeal against the decision of the High Court ([2011] NZHC 490) that receivers of a mortgagee who sold the mortgagor’s real property were “personally liable” for the GST.  However, the Court nevertheless ordered that the receivers pay the GST to the Commissioner (in preference to the secured creditor of the mortgagee) as the GST properly represented a cost of the sale of the property.

My discussion of the decision of the Court of Appeal can be accessed here.

In other news, in Campbell and Commissioner of Taxation [2012] AATA 473 the Tribunal found that the applicant was not entitled to claim input tax credits in relation to an enterprise claimed to be carried on.  The Tribunal also upheld the administrative penalty of 50% on the basis that the applicant was reckless.

The essence of the dispute was whether the applicant was carrying on an enterprise.  The case is a classic example of the applicant being unable to substantiate the claim that an enterprise was being carried on, whether by documentary or oral evidence.  The applicant contended that she and a friend carried on a business of software development, or at least were in a start-up phase for that business.  The problem for the applicant was that the evidence was that her house was burgled and all the business records and computer records were stolen.  This meant that she was unable to substantiate her claims by producing documentary evidence.  Also, the applicant did not call her business partner (or a business mentor who was said to be assisting the start-up phase).  Also, during evidence, the applicant was unable to clearly outline the types of activities that were carried on during the start-up phase.  In light of these matters, the Tribunal found that there were insuperable obstacles to a finding that the applicant was carrying on an enterprise.  The Tribunal also accepted that the actions of the applicant in claiming input tax credits were reckless.

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