As purchasers of a Blenheim farmlet, the Holdaways recovered $42,800 damages for a GST credit denied after vendor David Ellwood failed to tick a box in the contract acknowledging he was GST registered.
In 2017, Mr Ellwood sold his eight hectare property on Waihopai Valley Road to the Holdaways. With no house on the property, it sold for $335,000 ‘inclusive of GST (if any)’. On what is a standard form agreement, Mr Ellwood said he was not registered for GST. In fact, he was. After signing, and just prior to settlement, the Holdaways became GST-registered. Buying from a non-registered vendor would allow then to claim a $42,835 GST credit. Their GST claim was refused because Mr Ellwood was also registered. Land sales between GST registered taxpayers are zero-rated. If the Holdaways had not in fact registered for GST, Mr Ellwood would have been required to account to Inland Revenue for GST on the sale, since he was GST registered.
In the High Court, the Holdaways were awarded damages for the disallowed GST credit and for accountant’s fees sorting out the calculations. Standard form agreements commit vendors to declaring their GST status when a contract is signed; unregistered purchasers have a discretion to later register for GST but are obliged to tell vendors of their changed GST status. The Holdaways were not penalised for failing to tell Mr Ellwood they had subsequently registered.
Holdaway v. Ellwood – High Court (11.04.19)
19.074