TPW
19/06/2015 15:07
GENERAL
PRICE SENSITIVE
REL: 1507 HRS Trustpower Limited
GENERAL: TPW: Tax Litigation - Court of Appeal Judgment
NZX Announcement
Tax Litigation - Court of Appeal Judgment
Today the Court of Appeal has released its judgment in relation to a dispute
between Trustpower and the Inland Revenue in relation to the tax treatment of
feasibility expenditure incurred in the 2006 to 2008 financial years.
Trustpower was successful in a previous High Court case where it was
determined that Trustpower had appropriately deducted feasibility expenditure
and that certain resource consents acquired were not capital assets.
The Court of Appeal judgment has overturned the High Court determinations and
has disallowed the expenditure claimed by Trustpower as deductible for the
2006 - 2008 tax years.
In its audited financial statements for the year ended 31 March 2015
Trustpower disclosed its estimated exposure for the 2006 - 2008 tax years and
future years in a contingent liabilities note (Note 25) should the Court of
Appeal not rule in Trustpower's favour.
The forecast exposure as at 31 March 2015, included in the note, is repeated
in the table below:
2006 to 2008 2009 to 2010 2011 to 2015 Total
$000 $000 $000 $000
Tax Payable 5,924 2,632 2,074 10,630
Interest expense 2,920 1,008 314 4,322
The tax payable would primarily result in a balance sheet adjustment in the
financial statements as most resource consents are depreciable intangible
property. The impact of these adjustments on the tax expense in the income
statement is difficult to estimate but is unlikely to exceed $2,500,000 for
all years up to March 2015. The interest cost would be an income statement
expense.
The Court of Appeal has also quashed $1.2 million of costs awarded to
Trustpower by the High Court.
The Court of Appeal has also ordered Trustpower to pay Inland Revenue costs
for both the High Court and Court of Appeal cases but these are not able to
be quantified at this time.
Trustpower is very disappointed with the Court of Appeal decision and will be
working with its legal advisors to review the judgment in detail to assess
whether there are grounds for seeking leave to appeal to the Supreme Court.
Trustpower has 20 business days to determine whether to make an application
for leave to appeal.
Robert Farron
Chief Financial Officer
Phone: 021-224-7275
End CA:00265948 For:TPW Type:GENERAL Time:2015-06-19 15:07:33
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