MHK Report on IRD Pursuing Directors For Unpaid Tax (2)

We recently commented on the IRD increasingly noticeably more aggressively pursuing directors of insolvent companies for unpaid taxes. Ian Malcolm, Managing Director of MHK Chartered Accountants Auckland, warned directors of this, and in this release covers some specific examples where the IRD have successfully taken action against directors.

C of IR v Revo the Commissioner succeeded in having an uncooperative liquidator removed to ensure his replacement would diligently pursue recovery of potential funds that would be available to creditors, the main one being the IRD.

In Re Petherick28 the High Court ordered a director who continued to draw a large salary while PAYE and other debts remained unpaid to refund a portion of that salary and repay the priority PAYE to the company for the benefit of its creditors.

Rowmata Holdings involved a commercial land development, purchasing land with a GST credit of $720,000 which was refunded and paid to the vendor as the deposit. The company could not settle and eventually defaulted on the transaction. The High Court stated that “diligent directors exercising reasonable skill and care would have chosen to retain the GST refund in order to be sure that it could be repaid on failure of the transaction. Diligent directors would have either found another source of funds from which to pay the deposits or not bought the property in the first place.” Accordingly, the court ordered the directors to make reparation to the company finding it just and equitable that they refund 70% of the substantial amount of lost GST.

Ian Malcolm of MHK Chartered Accountants Auckland advised to contact your professional adviser as soon as possible if the company is encountering financial difficulties, saying that often proactive discussions with the IRD or other creditors can assist, or other methods of funding can be put in place while the business is recovering – however warned that the business must be investigated to have a good chance of getting back to profit before “throwing good money after bad.”

MHK Chartered Accountants are Auckland Chartered Accountants who specialise in business structuring and legally minimising all types of taxation obligations, and welcome a no-obligation discussion free of charge or for more information please contact Ian Malcolm 09 917 2893 or 021456225, or  Aaron Neels 09 917 2897. For more information on chartered accountants Auckland, business structuring and accounting firm Auckland please go to

https://aucklandaccountant.net.nz/

 

The above article is written with acknowledgement of publications from, and thanks to, CCH www.wolterskluwer.co.nz