Latest News [index] Going concerns still causing problems
The Tax Review Authority ("TRA") has determined that the sale of an owner/operator Mainfreight Metro business was not the supply of a going concern. Although the parties had agreed in the agreement for sale and purchase that the business was a zero-rated going concern, the purchaser claimed an input tax credit in respect of the purchase. The IRD disallowed the claim for the input tax on the grounds that the transaction was a going concern which was zero-rated for GST purposes.
The TRA, finding in favour of the taxpayer purchaser, held that the going concern requirements were not met as the vendor, whose contact with Mainfreight ended at settlement supplied a truck and equipment not a business. Whether the purchaser would be offered a new contract was between the purchaser and Mainfreight.
This case serves to highlight the need to seek advice before selling a business as a going concern. Simply agreeing that the sale is a going concern is not enough to satisfy the legislative requirements that there is a supply of a business activity that can be carried on seamlessly by the purchaser.