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05 Apr 2011
Appeal Status

Courier did not buy going concern

2011 case note - courier did not buy a going concern; no going concern supplied and the disputant entitled to an input tax credit.

TRA 19/10 [2011] NZTRA 3

Goods and Services Tax Act 1985


A courier did not buy a going concern as the vendor could not supply a going concern.

Impact of decision

This is one of a number of going concern cases. This case turned on the finding that the vendor did not have a contract with the company (MF) capable of being assigned to the disputant. Without that contract there could be no going concern.


This was a "going concern" case.

The disputant was a one-person company which purchased courier-driver business assets from a courier driver in 2008. No contract existed between the vendor and MF (the company he drove for) and the disputant did not get a contract with MF from the vendor. However, prior to the contract being entered, the disputant was introduced to MF and "approved" by MF as a driver that MF would work with.

The sale was originally treated as a sale of a going concern and zero rated. However, the disputant later concluded that the sale was not zero rated but was goods and services tax ("GST") inclusive. The disputant then sought a GST input credit and a resulting GST refund.


Judge Barber concluded that there was no going concern supplied and that the disputant was entitled to an input tax credit.

The Judge acknowledged that this was a simple business structure, which meant many of the considerations of a more complex business were not present. He also accepted the Commissioner's submission that the intention of the parties was that the supply should be zero rated but his honour continued that "the intent of the parties cannot overcome the need for the relatively seamless transfer of a functioning taxable activity".

On these facts the Judge concluded that while the supplier (vendor) was in business, the disputant established another business. The Judge considered that the disputant "established a new activity, albeit on a structure acquired from the vendor".

The Judge accepted the taxpayer's argument that, as MF did not contract with its drivers, the vendor did not have a contract guaranteeing work so it was impossible for the vendor to assign his taxable activity to the disputant; as a consequence the disputant did not get a going concern but used the asset it had bought to start its own taxable activity.

His Honour concluded:

  • It seems to me that, in terms of the criteria of section 11(1)(m) of the Act, the taxable activity of the vendor was not a going concern at the date of the vendor's sale of the truck and its equipment to the disputant. This is because the vendor's contract with [MF] ... ended at the point of sale of the truck. There is no dispute that generally, [MF] would offer a fairly similar activity to a purchaser of a truck from one of its team of drivers. However, any such arrangement obtained by the purchaser of the truck with [MF] is a new activity entered into by [MF] with the new driver. The new arrangement is provided by [MF] and is not provided by the vendor of the truck. [55]