|
|
|
LAWCOMM 403 long notes.docx
LAWCOMM_403_long_notes.docx
Showing 140 out of 157
LAWCOMM 403 long notes.docx-CONTENTS Tips ...........
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
LAWCOMM 403 long notes.docx-CONTENT...
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
Page 140
Labour government introduced a new marginal tax rate from 33% to 39% on 2000
As a result from being employed by the company, Hooper’s pre-tax income fell from
$650,000 to $120,000
The residual profits were company income – the company made dividends to the family trust
For Penny:
Followed a similar structure to Hooper, but did so in 1993 (when the top personal rate of tax
was equal to the company rate: 33% at the me)
Hooper’s income was $302,000 in 1999, $125,000 in 2000 and $100,000 from 2001 onwards
– this was a salary fixed with an accountant each year
The company’s income was between $612,000 to $718,000 each year
The companies paid imputed dividends to their trusts
There were other unsecured, interest free no-term loans to Penny (e.g. some for tuion expenses for
his children and maintenance payments)
o
Submissions
Hooper and Penny accepted that being paid the amounts they were would be “commercially silly” or
unrealisc if they were independent from the company
o
Judgment (Court of Appeal)
Applied
Ben Nevis
This was tax avoidance
“The Supreme Court has made it clear in
Ben Nevis
that the adopon of legimate legal structures or
enes will not be a barrier to a finding of tax avoidance if the arrangements are arficial, contrived,
or amount to a pretence. Findings of that character will be influenced by assessing them in the light of
commercial reality and the economic effect of the arrangements. The conclusion of the Supreme
Court in this respect is supported by a substanal body of precedent both in this Court and the Privy
Council.” (at [110])
There was nothing wrong with a company carrying on the business, or with the company being owned
by a family trust – these were ordinary commercial arrangements and not tax avoidance in
themselves
The problem was the combinaon of a dramac fall in income and the coincidental ming with tax
rate changes – these factors lead to an inference that the arrangement was about the tax
The structure was the vehicle by which they were able to obtain the advantage of the lower
company tax rate while sll enjoying the full benefit of the income of the companies for
themselves personally and their families – they had the same profits but with a different tax
o
Judgment
This was tax avoidance
There was a single step which took advantage of an otherwise normal business structure – they set an
arficially low level of salary which had the effect of altering the incidence of taxaon
The fixing of the low salary enabled the bulk of the profits of the company to be transferred
by dividends to the trust, and then enjoyed by the taxpayers (by different means) but the
benefit secured without the impost of higher rates
Tax avoidance can be found in an individual step in a wider arrangement
like this – although most of
what Penny and Hooper did was normal, the one component that made the whole arrangement tax
avoidance was the seng of the salaries at a low level
o
Commentary
This case was a controversial decision
This shows that tax avoidance can be very difficult and go either way
White v Commissioner of Inland Revenue
(2010) 24 NZTC 24,600 (HC)
o
Facts
An anaesthest was employed by a company that carried on an avocado farming venture
The anaesthest was paid a low salary
o
Judgment
The tax advantage was permissible and unlike
Penny and Hooper
, the company lacked the funds to be
able to pay a normal salary – it wasn’t doing too well for the moment, but once it did, it was going to
be pay a proper salary
Ace your assessments! Get Better Grades
Browse thousands of Study Materials & Solutions from your Favorite Schools
Vanderbilt University
Vanderbilt_University
School:
Tax_Law
Course:
Great resource for chem class. Had all the past labs and assignments
Leland P.
Santa Clara University
Introducing Study Plan
Using AI Tools to Help you understand and remember your course concepts better and faster than any other resource.
Find the best videos to learn every concept in that course from Youtube and Tiktok without searching.
Save All Relavent Videos & Materials and access anytime and anywhere
Prepare Smart and Guarantee better grades
Know more
Students also viewed documents
lab 18.docx
lab_18.docx
Course
Course
3
Module5QuizSTA2023.d...
Module5QuizSTA2023.docx.docx
Course
Course
10
Week 7 Test Math302....
Week_7_Test_Math302.docx.docx
Course
Course
30
Chapter 1 Assigment ...
Chapter_1_Assigment_Questions.docx.docx
Course
Course
5
Week 4 tests.docx.do...
Week_4_tests.docx.docx
Course
Course
23
Week 6 tests.docx.do...
Week_6_tests.docx.docx
Course
Course
106
