It was an abuse of process for a taxpayer to try and circumvent the prescribed tax disputes process by claiming Inland Revenue was refusing to disclose records it was holding. In refusing judicial review of Inland Revenue’s behaviour, the Supreme Court ruled the taxpayer did not specify how it was in any way prejudiced by Inland Revenue conduct.
Tannadyce Investments has been in a long running dispute with Inland Revenue. Controlling shareholder of the Christchurch-based company was David Ian Henderson.
The court was told Tannadyce claimed Inland Revenue was holding financial records needed by the company to file its tax returns for the years 1993-1998.
If Inland Revenue were acting in bad faith, withholding documents it knew a taxpayer required, judicial review is available to hold officials to account for an abuse of power. The Supreme Court ruled this was not such a case.
In March 1999, Inland Revenue issued Tannadyce with “nil” assessments for the tax years in question. The company responded with what it called a “global return” for these tax years claiming tax losses of $1,539,733. Inland Revenue argued that a “global return” does not comply with the statutory requirement to file returns for each tax year. It reissued its “nil” assessments, requiring Tannadyce to follow the normal tax disputes process to prove its claimed tax losses. In subsequent tax years, Inland Revenue disallowed the claimed tax losses as losses carried forward.
Tannadyce said it could not use the tax disputes process because Inland Revenue was holding all necessary records and was refusing to release them. Tannadyce stood by its global return.
The Supreme Court ruled that Tannydyce failed to show it was not practically possible for the normal rules to be followed. Its global return managed to claim a loss for the six tax years down to the last dollar. It is perfectly plain, said the court, that Tannydyce had sufficient information and records to file a global return. It should have been able to apportion this global figure between the various tax years, using reasonable estimates where needed.
While the claimed losses collectively covered six years, there was evidence that Tannydyce ceased trading in 1992 having traded for no more than 18 months at most.
Tannadyce Investments Ltd v. CIR – Supreme Court (20.12.11)
12.002