Special Newsletter October 2011
Penny & Hooper v IRD
The decision of the Supreme Court has major
implications for all taxpayers who operate
under a Company or Trust structure.
It concerns the level of salary a Company or
Trust must pay its effective owners for tax
purposes.
The background facts
Penny & Hooper (P&H) transferred their
individual orthopaedic businesses to
separate companies owned by a family
trust.....
What the Courts said
3 Courts, 3 different decisions for 3 different reasons. What chance does a taxpayer have????.....
The IRD View
Surprise, surprise but the IRD have completely ignored all 3 Court decisions and have instead, issued a Revenue Alert detailing their view which is as follows....
What we think
What we really think is unprintable so this is the sanitised version.....
Are there any exemptions to the need to pay either a commercial salary or the IRD's 80%?
Fortunately both the Supreme Court and IRD agree that commercial salaries need not be paid in the following instances....
Will the IRD go back and reopen prior year tax returns?
At this stage they say No, other than audits already under way which have been awaiting the P&H decision. But don't hold your breath......
Given the top personal tax rate and trust tax rate are the same, do we need to even worry about this in future?
Unfortunately the answer is Yes.......
Confidential
The information contained in the Newsletter is issued in summary form exclusively for the information of clients and staff of Winstanley Kerridge Ltd
and should not be used or relied upon as a substitute for detailed advice or as a basis of formulating business decisions.
