When does the response period to issue a NOR start following the Taxation Review Authority’s decision that a NOPA should have been accepted out of time?
2018 case note – CIR's Notice of Response was issued within the required response period – deemed acceptance.
Goods and Services Tax Act 1985, Tax Administration Act 1994 ss 89AB, 89AC, 89H(2), 89K
Summary
The Taxation Review Authority (“TRA”) concluded that s 89AC of the Tax Administration Act 1994 (“TAA”) applied to this dispute and that the Commissioner of Inland Revenue’s (“the Commissioner”) Notice of Response (“NOR”) was issued within the requisite response period. Even if s 89AC was not applicable, the Commissioner’s NOR was issued within the response period under s 89AB (prior to amendment). Furthermore, even if it was not, there has been no deemed acceptance of the disputant’s Notice of Proposed Adjustment (“NOPA”) by the Commissioner under s 89H(2).
Impact
Section 89AC specifies that when an initiating notice (such as a NOPA or statement of position) is filed late, the response period starts from the date of the decision of the Commissioner or the Court to accept the initiating notice out of time. This decision confirms that s 89AC applies to decisions made by the Commissioner or the Court since 24 February 2016, when the section came into force.
Similarly, the decision also confirmed that prior to the introduction of s 89AC, the wording of ss 89K(1) and 89AB(2) was not to be taken as meaning that the response period ran from the date the late NOPA was issued, but rather from the date of the decision to accept the initiating notice out of time.
Finally, the decision followed previous case law that there can be no deemed acceptance in these circumstances, as the NOPA is not valid until exceptional circumstances are found by either the Commissioner or the Court. As such, the ordinary dispute procedures in Part 4A of the TAA, such as deemed acceptance, are not applicable.
Facts
The Commissioner issued a Notice of Assessment for the GST period ended 31 October 2008 on 16 April 2013. Almost two years later, the disputant issued a NOPA dated 30 March 2015 which included a request under s 89K to have the NOPA treated as if it had been given within the applicable response period.
By letter dated 29 April 2015, the Commissioner refused to accept the NOPA under s 89K. On 9 July 2015 the Commissioner was served with proceedings in the TRA challenging, among other things, the Commissioner’s refusal to accept the NOPA.
On 5 May 2016 the TRA issued its decision (Case 4/2016 [2016] NZTRA 0427, (2016) NZTC 3/026). In relation to s 89K, the TRA concluded that the Commissioner’s decision to refuse to accept the NOPA out of time was incorrect, and it was set aside accordingly.
On 28 June 2016 the Commissioner issued her NOR. The disputant and the Commissioner then issued statements of position and a challenge notice was given by the Commissioner on 31 May 2017.
On 19 July 2017 the disputant filed this claim in the TRA.
Decision
Does s 89AC apply?
The TRA found that the meaning and purpose of s 89AC is clear and that is, to specify a response period for the filing of a NOR by the Commissioner where the provisions of s 89K are met by a disputant. The provision is purely of a procedural nature. It came into force on 24 February 2016, and was not restricted in its application to disputes commenced after that date.
The TRA was satisfied that ss 89AB(2) and 89AC apply to this dispute and found that the Commissioner’s NOR was issued within the requite response period set out in s 89AC(2) and is valid.
Situation in the event that s 89AC does not apply?
The TRA also considered whether there would have been deemed acceptance under the prior s 89AB. The TRA found that until exceptional circumstances are established, a late NOPA does not have any effect and in these circumstances, it follows that there is no obligation on the Commissioner to issue a NOR at that time.
Section 89K(1) of the TAA says that where exceptional circumstances are subsequently found, then the disputant’s NOPA is to be “treated for all purposes under this Part as if it had been given within the applicable response period”. The TRA noted that s 89K(1) does not refer to the response document and concluded that there was no basis on which to conclude that the 2-month response period to file the NOR commences from that date that a disputant issued its late NOPA. Her Honour Judge Sinclair noted that in most cases, this period would have expired before any decision would likely be made by a hearing authority in the event of a challenge to the Commissioner’s refusal to find exceptional circumstances.
Finally, the TRA stated that even if it could be argued that an earlier response period applied, it did not accept there had been deemed acceptance of the disputant’s NOPA by the Commissioner. Her Honour followed the reasoning of Heath J in Jacobs-Maxwell v Commissioner of Inland Revenue (2011) NZTC 20,094 that no question of deemed acceptance arises if the ordinary disputes resolution procedures set out in Part 4A are not applicable. As the disputant had failed to issue a valid NOPA within the requisite time period and had to establish exceptional circumstance under s 89K, the claim clearly fell outside those ordinary procedures.