Obtaining
resource consents for new electricity generation is a capital cost the Court of
Appeal ruled in a successful Inland Revenue appeal challenging Trustpower’s tax
accounts. This will cost Trustpower over
$15 million dollars for a decade of tax arrears according to Trustpower’s
latest annual report.
Inland Revenue challenged Trustpower’s tax
treatment of $6.56 million incurred in the 2006-2008 tax years as the cost of obtaining
land use consents, water permits and water discharge permits for four possible
new generation projects in the South Island: two hydro (at Arnold and Wairau)
and two wind farms (at Kaiwera Downs and Mahinerangi). Trustpower said these costs were incurred as
part of its feasibility studies into future projects and should be written off
as an expense in the year incurred.
Inland Revenue assessed the disputed expenditure as capital costs, to be
depreciated over the life of the asset.
The Court of Appeal ruled resource consents are
inherently capital in nature. They are
valuable rights, part of long term future capital works. It did not matter that Trustpower had not
committed to using these resource consents by starting construction.
Trustpower’s 2015 annual report disclosed that
an adverse Court of Appeal ruling would likely require the company to pay tax
arrears of $15.2 million for the ten tax years 2006-2015: $10.5 million tax
arrears and $4.7 million interest.
The Court of Appeal also ordered Trustpower to
repay a costs award made in its favour in the High Court. This requires Trustpower to pay Inland Revenue
a further $1.17 million.
Inland
Revenue v. Trustpower – Court of Appeal (19.06.15)
15.069