Technical decision summary: GST input tax deductions, shortfall penalties

Facts | Ngā meka

1. The Taxpayer is a company that provides business advisory and consultancy services.
The Taxpayer argued that it and its sole director and shareholder (the Director) were
also directors of Company A which is part of a company group. Company A was
placed into voluntary liquidation during the income tax period under dispute.

2. The Director filed the Taxpayer’s two 6-monthly GST returns and an income tax return
that were subject to the dispute.

3. Following an analysis of the information requested from the Taxpayer, Customer and
Compliance Services, Inland Revenue (CCS) considered that the Taxpayer may have
claimed input tax deductions and income tax deductions it was not entitled to and may
have understated its income in its income tax return.

Issues | Ngā take

4. The main issues considered were:
▪ whether the Taxpayer was entitled to the input tax deductions it claimed in its
GST returns;
▪ whether the Taxpayer was entitled to the deductions it claimed in its income tax
return;
▪ whether the Taxpayer included all of its income in its income tax return;
▪ whether the Taxpayer was liable for the following shortfall penalties:
o gross carelessness;
o not taking reasonable care; or
o unacceptable tax position.
5. A preliminary issue on the onus and standard of proof was also considered.

Source: govt.nz

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