Vela Fishing gets off $2m tax bill

By Mike Ross

Friday 6th October 2000

A $2 million dollar tax bill issued to Hamilton fishing company Vela Fishing has been invalidated after a High Court test case on waivers.

Vela Fishing is owned by brothers Peter and Philip Vela, estimated to be worth $50 million on The National Business Review Rich List.

The court ruled there is no legal basis for taxpayer waivers delivered to Inland Revenue in the two years up to November 1998.

In its 1991 tax return, Vela Fishing declared a tax loss of $154,000.

Inland Revenue later disallowed a deduction claimed in relation to a performance bond.

This increased the company's taxable income by $6.2 million, creating a $2 million tax bill.

The reassessment was made outside time limits for issuing amended assessments.

Generally, a statutory time bar prevents the IRD making reassessments more than four years from the end of the income year in which the return was filed.

The High Court was told Vela Fishing signed a time bar waiver in March 1998, days before the time bar kicked in, agreeing to accept reassessments outside the four-year limit.

Vela Fishing agreed to the waiver because of delays on its part in providing information requested by Inland Revenue.

In the High Court, Justice Peter Penlington ruled waiver provisions in the Income Tax Act 1976 did not neatly overlap into the Income Tax Act 1994 and the Tax Administration Act 1994 when tax law was rewritten.

As a result, there was no legal authority for time bar waivers signed between October 1996 and November 1998.

Because the waiver signed by Vela Fishing had no legal effect, the increased tax assessment was out of time and invalid.

Vela Fishing is one of several ventures owned by the Vela brothers, who are also active in the bloodstock world.

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