20 October 2021

Tax: Inland Revenue v. Husman Ltd

Lockdown restrictions keeping an Auckland restaurant closed was no defence to Inland Revenue forcing liquidation for unpaid tax debts totalling $348,200 when tax payments were in arrears before the pandemic struck and the restaurant had little prospect of paying arrears since it had persistently traded at a loss.  

Husman Ltd operated a restaurant in Auckland’s central business district.  The High Court was told it had cashflow difficulties from the outset, having commenced trading in late 2018.  Payments due Inland Revenue were not made for GST and PAYE.  Trading stopped during government-mandated pandemic lockdowns in 2020 and 2021.  By time of the first lockdown, tax arrears already totalled $160,800.  Government wage subsidies accessed during the lockdowns totalled some $222,000.  Husman had failed to account for PAYE on these wages, Inland Revenue said.

With Inland Revenue threatening liquidation for non-payment, Husman made a series of escalating offers to pay arrears: first to pay arrears then totalling $267,000 in $2000 weekly instalments; later to pay continuing arrears at $2500 per week.  Inland Revenue rejected all offers.  The business had no chance of making offered payments and still meeting continuing tax obligations, it said.   

Justice Robinson ordered Husman into liquidation. Inland Revenue is justified in forcing liquidation where there has been flagrant and on-going failure to comply with tax obligations and where proposals to pay by instalments are of dubious commercial merit, he ruled.

Claims that Inland Revenue’s liquidation application was blocked by the Civil Defence Emergency Management Act were dismissed. Quarantine restrictions were not an ‘emergency’ as defined by the Act, Justice Robinson ruled.  And even if they were, the Act does not relieve taxpayers from their tax obligations, he said.

Inland Revenue v. Husman Ltd – High Court (20.10.21)

21.173