After Inland Revenue waved the white flag admitting it had not properly considered Watergates NZ’s instalment plan for paying tax arrears, Watergates went on the attack asking the High Court to severely circumscribe grounds on which Inland Revenue could refuse a new instalment proposal.
Justice Grau ruled Inland Revenue cannot be restricted in the criteria used; it must treat any new proposal in accordance with the law.
Taupo-based Watergates NZ Ltd provides water control equipment, primarily valves and penstocks.
Facing compulsory liquidation for non-payment of a $313,000 tax debt, Watergates put a series of proposals to Inland Revenue offering payment by instalments.
Watergates improved on earlier proposals with a March 2023 offer including a personal guarantee by director Ross Nolan to pay outstanding arrears should Watergates not make good on the offered instalment payments.
This offer was supported by evidence of Watergates’ current trading position and copies of forward orders and contracts.
The High Court was told Inland Revenue dismissed the offer out of hand, later agreeing this was in breach of its obligations under the Tax Administration Act to properly consider a taxpayer’s financial position as at the date a request is made for instalment payments.
Inland Revenue consented to judgment entered against it in Watergates’ High Court judicial review application.
The legal effect was to treat as invalid Inland Revenue’s decision to reject Watergates’ 2023 proposal. This then required a court ruling on how Inland Revenue should reconsider Watergates’ application.
Watergates asked the High Court to order disclosure of Inland Revenue’s internal policies and guidelines used to assess instalment plan offers. It further asked for an order to limit grounds on which Watergates’ application might be refused, including any consideration of the company’s past record of tax defaults. Justice Grau refused both requests.
It is back to square one: Watergates is to submit a new instalment plan with updated financial information; Inland Revenue is to treat the application as a new application and judge it on its merits, applying the usual rules.
Instalment plans, once approved, can be cancelled where a taxpayer fails to make payments as agreed, or has negotiated the instalment plan on the basis of false or misleading information.
Watergates NZ Ltd v. Inland Revenue – High Court (8.05.24)
24.116