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High Court success against IRD

By Claire Mansell - 23 Jul 2012 - 1 comment

The High Court recently ruled in our client's favour in a case against the IRD. 

We acted for a liquidator.  Very shortly before (and soon after) the liquidation, the IRD deducted various monies from the company's bank account.

The Court agreed that the IRD was attempting to obtain an advantage as against other creditors that it was not entitled to.  The IRD has been ordered to return all the monies and pay costs.

For a more detailed analysis of the case, please contact Claire Mansell or Tony Johnson.

To read the full judgment please click here


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Claire, am interested in this - I assume there was no chargng order, what form of tax was this for, and on what basis did the IRD argue they could deduct PRIOR to liquidation?

Grant Grahamreply

The author replies       The IRD issued an attachment notice to the company’s bank under section 157 of the Tax Administration Act (TAA) which required the bank to deduct funds held in its account to pay the company’s outstanding tax liabilities. (Section 157 gives the IRD a statutory right to place an attachment over defaulting tax payers' bank accounts prior to liquidation).

At the time the notice was issued, the IRD was only aware that the company had outstanding GST liabilities and applied the deducted funds accordingly. After liquidation, the IRD realised that there was also outstanding PAYE. The IRD argued that under section 167 of the TAA, the funds held in the company’s bank account were monies held in trust for the payment of PAYE, therefore when the deductions were made, they were in payment of PAYE.

The High Court agreed that the payments were applied towards PAYE, but said this didn’t affect the outcome as any trust which arose in relation to PAYE was extinguished on liquidation. As all the deductions were received by the IRD after liquidation, they were considered uncompleted attachments pursuant to section 251 of the Companies Act (which the IRD was not entitled to retain the benefit of).


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