The Court of Appeal upheld decisions of the High Court confirming the Commissioner of Inland Revenue’s disallowance of a $1,116,000 management fee for income tax purposes.
The Court of Appeal dismissed Honk Land Trustees Limited’s (“HLT”) appeal on the following alternative grounds:
(1) there was no satisfactory evidence to show that management services were in fact provided;
(2) there was no sufficient nexus shown; and
(3) in the event the management fees were deductible, they were nevertheless part of a void tax avoidance arrangement.
Additionally, the Court of Appeal agreed that the Commissioner was entitled to impose abusive tax position shortfall penalties.NewZealand vs Honk-Land-Trustees-Limited-v-Commissioner-of-Inland-Revenue