IRD promises 'measured approach' after Penny & Hooper victory
While welcoming the Supreme Court decision in its favour, Inland Revenue promises a measured approach in how it will be applied.
Inland Revenue victory in the Penny and Hooper tax case upholds IRD's view that the income allocation or diversion arrangements constiture tax avoidance and helps clarify the law.
That's the view of Acting IRD Commissioner Mary Craig who released a statement after this morning's Supreme Court ruling.
However, while welcoming the decision, Inland Revenue will be taking a measured approach as to how it is applied.
“The decision does not mean that every incorporated business, or one that is managed through a family or trading trust, is a tax avoidance arrangement, and the Court gives clear advice on that,” Ms Craig said.
The Court also confirmed that avoidance does not arise, despite a low salary being set, if particular circumstances are present - such as a business being in financial difficulty, or where there are capital investment requirements.
“The issue is really about balancing various factors, such as how such entities are managed, and the deliberate use of companies and trusts to divert income and reduce a person’s tax obligations. If one person is generating the profits, but is diverting their income into other structures and declaring a reduced salary for the financial benefit to themselves or their family, then that is tax avoidance,” Ms Craig said.
NBR staff
Wed, 24 Aug 2011
Wed, 24 Aug 2011
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IRD promises 'measured approach' after Penny & Hooper victory
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