Exceptional circumstances examined by the Taxation Review Authority
2011 case note – Useful discussion from the Taxation Review Authority that draws together the cases in the area of 'exceptional circumstances'.
The Taxation Review Authority ("TRA") considered there were arguable exceptional circumstances that existed in respect of late served Points of Objection Notices but sought further evidence prior to deciding the application for an extension of time.
Impact of decision
While about the old objection procedures, there is a useful discussion drawing together the cases in the area of "exceptional circumstances" that is of wider interest.
The three taxpayers affected by this ruling had sought cases stated to the TRA under the old objection procedure.
Under that procedure the taxpayer had to complete a Points of Objection Notice and deliver it to the Director, Litigation Management, at a specified address provided in the TRA Regulations 1998, within a specified statutory time frame. Failure to do so automatically ended the objection. However it was possible for a taxpayer to seek an extension of time to file their Points of Objective Notice from the TRA.
In each of these cases the taxpayers failed to serve timely Points of Objection Notices upon the Director, Litigation Management. They also failed to seek an extension of time for filing their Points of Objection Notice from the TRA. The Commissioner took as a preliminary point this failure and asked the TRA to dismiss the objections.
The taxpayer argued that there had been timely service as the calculation of time did not commence until the Commissioner provided the taxpayer with a Points of Objection Notice form; that the Commissioner has "declined" rather than "disallowed" their objections which had confused the tax agent; and that in one case the Commissioner had provided the wrong due date for the Points of Objection Notice. On the facts the Points of Objection Notice in that case was provided several weeks after either the correct or the incorrectly advised date. The taxpayers also sought an extension of time on the basis of exceptional circumstances.
Judge Barber found as follows:
- The Points of Objection Notices had not been served in a timely manner as the time for serving a Points of Objection Notice ran from the date the taxpayer gave notice that it wanted a case stated and not from receipt of a Points of Objection form from the Commissioner . The TRA Act and Regulations did not require the Points of Objective Notice to be supplied by the Commissioner to the taxpayer and "put the onus on the objector to complete a Points of Objective Notice and there is no requirement for the IRD to supply an objector with one".
- There was no merit in an argument trying to distinguish "declined" from "disallowed": "If an objection is declined it is disallowed".
- While the Commissioner provided an incorrect (and later) date for service, this made no difference as the Points of Objective Notice was supplied a few weeks after even the incorrect date.
His Honour reviewed the law addressing what constituted exceptional circumstances (at ) and accepted that it was essential there be:
- An event or circumstance which is unusual or out of the ordinary, but not so rare as to be categorised as extraordinary, which operates alone or together with other circumstances (unusual or not);
- Which must be beyond the control of the taxpayer;
- So as to provide the taxpayer with a reasonable justification for not commencing the objection or challenge within the required period;
- An act or omission of an agent of the taxpayer is only exceptional circumstance if it was caused by an event or circumstance beyond the agent's control and could not have been anticipated and the effect of which could not have been avoided by compliance with accepted standards of business organisation and professional conduct.
The Court was concerned that the Commissioner's pre-printed blank Points of Objection Notice forms had an incorrect address for service upon the Director, Litigation Management. While accepting it is the legislation that must be complied with and not Inland Revenue's publications, the incorrect address on an Inland Revenue form may amount to an exceptional circumstance.
The Judge then gave the taxpayers leave to reconvene to provide evidence that the incorrect address on Inland Revenue's form led them into error and as such was an exceptional circumstance which would justify the TRA granting an extension of time.
Tax Administration Act 1994