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IRD reaps $4M from tax-payers using trusts, sets deadline to cut deals

Wednesday 10th October 2012

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Inland Revenue (IRD) has collected $4 million from 170 taxpayers since the Supreme Court found two orthopaedic surgeons had avoided income tax by paying themselves low salaries through a structure of companies and trusts.

IRD announced on Wednesday that those affected by the Penny and Hooper decision have until March 31, 2013 to make voluntary disclosures.

IRD has previously agreed to accept settlement for those who make voluntary disclosure for a two-year limit, which is less than the four years that could be audited under the decision.

The period of time for disclosure was brokered between the New Zealand Institute of Chartered Accountants (NZCIA) and IRD, says Jo Doolan, a tax partner at Ernst & Young.

Until now the IRD offer to restrict tax adjustments had lacked clarity around when the offer would expire, Doolan said.

"But taxpayers are justified in having a sour taste in their mouth," she said.

Businesses were struggling and the last thing they needed was to be side-tracked by a lengthy battle with IRD.

The extension of the period for the two-year concession was welcomes by the NZICA.

IRD had sent risk-review letters to a range of taxpayers who it thought seemed to be taking positions at the more extreme end of the scale, NZICA said.

IRD's group tax counsel, Graham Tubb, said the department's objective was to encourage taxpayers affected by the case to contact it.

"By continuing this concession until 31 March 2013, we anticipate further voluntary disclosures, and this is a process that benefits everyone involved," Tubbs said.

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