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15 Jul 2009
Appeal Status
Not appealed

Decision to impose section HK 11 disputable

2009 case note - decision to transfer tax liability to a company director under section HK 11 of the Income Tax Act 1994 is a 'disputable decision'.

Commissioner of Inland Revenue v Colin Skudder


The Commissioner assessed the director of the company under the provisions of section HK 11 ITA 1994 without first issuing a Notice of Proposed Adjustment ("NOPA"). When debt recovery action was taken, the District Court found that it could not impose judgment on the director because the Commissioner's decision to impose the provision of section HK 11 was subject to dispute in the Taxation Review Authority.

Impact of decision

The Commissioner does not intend to appeal this decision. He considers that, although there are arguments to the contrary, the Court, following the decision in Spencer & Anor v CIR (2004) 21 NZTC18, 818, has held that a decision to transfer tax liability to a company director under section HK 11 of the Income Tax Act 1994 (now section HD 15) is a "disputable decision".


The defendant was the sole director of a company which was assessed for pre-liquidation tax on 10 February 2002. The Commissioner imposed the provisions of section HK 11(1) and (3) of the Income Tax Act 1994 and claimed that the defendant was liable for the pre-liquidation debt of the company.

No notice of proposed adjustment was filed by either the company or the defendant in relation to the pre-liquidation assessments of the company. On 25 April 2005 the Commissioner sent the defendant a notice purporting to make the company and the defendant joint and severally liable for the debt. Recovery proceedings were commenced on 20 May 2006.

The Statement of Defence by the defendant challenged the decision of the Commissioner to invoke section HK 11 and claimed that it was a "disputable decision" in terms of Part VIIIA of the Tax Administration Act 1994 ("TAA"), making the decision amenable to challenge before the Taxation Review Authority ("TRA") and therefore outside the jurisdiction of the District Court to determine. The counsel for the defendant also issued a NOPA to the Commissioner in relation to the decision to invoke section HK 11 but not in relation to the tax assessed to the company.


Gittos DCJ held:

The Commissioner has argued that the decision under HK 11 as to whether the defendant's liability as an agent is properly made is not by statutory definition a disputable decision (section 138E of the TAA), and accordingly not a matter which may be challenged within the statutory code before the TRA.

Spencer is an obstacle to the Commissioner's argument. Despite the defendant's failure to put in returns with his NOPA, his case could not, on the facts, be distinguished from Spencer.

While it appears there are some parts of HK 11 which may be amenable to being regarded as non-disputable decisions under section 138E of the TAA, neither the findings of fact to be made under HK 11(1)(a), (b) and (c) which are necessary to trigger the operation of HK 11(3), nor the substantive decision to treat any person as an agent under HK 11(3) are to be so construed.

Income Tax Act 1994 and Tax Administration Act 1994