Inland Revenue has started publishing Technical Decision Summaries (TDS’) from mid-2021. A TDS is an abridgment of either an adjudication or private ruling decision made by Inland Revenue’s Tax Counsel Office (TCO).
TDS’ will be published within three months of a technical decision being finalised. They are not binding and are for information use only, and will be archived after five years of publication. A TDS contains four sections: facts, issues, decisions, and reasons for decisions.
Not all private rulings and adjudication decisions will be published, but the aim is to make Inland Revenue decisions and processes clearer and more transparent, to aid taxpayer compliance and support the integrity of the tax system.
With Inland Revenue’s apparent heightened activity on the GST treatment of land sales and purchases, a recent topical TDS is 22/10 GST: Whether property sale is zero-rated. Time bar. In this TDS, the taxpayer was a GST-registered company whose taxable activity involved building residential properties for sale. The taxpayer entered into an agreement for the sale of a dwelling – the purchase price was stated to be “inclusive of GST (if any)”, the going concern clause had not been deleted, and the purchaser stated they were also GST-registered. The GST clauses were not fully completed by settlement – the purchaser had not indicated whether they would use the property to make taxable supplies. However, the property was settled as a zero-rated supply for GST purposes.
Weeks after settlement, the purchaser’s solicitors amended the GST schedule, confirming GST registration and signalling they did intend at settlement to use the property for making taxable supplies. Further, the purchaser applied for holiday home registration in respect of the property.
The TCO decision was that the sale should not have been zero-rated as a supply of a going concern, nor under the compulsory zero-rating provisions. The latter decision was on the basis that, at the time of settlement, there was insufficient evidence to prove the purchaser intended to carry on a taxable activity of supplying short-stay accommodation, and the onus was on the taxpayer, as the vendor, to correctly determine the amount of GST payable.
Four years had passed from the GST return assessment period, hence the Commissioner had applied to amend the assessment under the time-bar exception on the basis the taxpayer knowingly or fraudulently failed to disclose all the material facts that were necessary for determining the amount of GST payable. This was rejected by the TCO, who considered that the available evidence suggested the taxpayer filed its GST return believing its position to be correct. As a result, time-bar applied to the transaction and the proposed amendment to re-assess the return was rejected.
This TDS provides useful insight into how Inland Revenue apply both the GST zero-rating and time-bar provisions and is written in a simple language for all readers.
It also highlights, once again, the need to take care when completing sale & purchase agreements – even though a transaction factually qualifies for compulsory zero-rating, if the GST clauses have not been correctly completed by settlement, the TDS implies Inland Revenue are unlikely to be sympathetic.
