A Week in Review

R&D Tax Credit Regime now law

The Taxation (Research and Development Tax Credits) Act 2019 received the Royal assent on 7^th May 2019 – the final stage in NZ’s legislative process.

The regime is effective from 1^st April 2019, with the consequence that eligible businesses with an annual R&D spend of more than $50,000, will be entitled to claim a tax credit in respect of their eligible R&D costs incurred to post the effective date.

Once an R&D tax credit claim has been approved, to the extent that there remains a credit balance once the businesses annual income tax obligation has been satisfied, up to $225k will be refunded in cash to the business, with any excess credit over the refundable amount, being carried forward to the next income year.

Should you require assistance or have any questions with respect to any aspect of the new R&D tax credit regime, please do not hesitate to contact Robert Aydon in our office.

High Court decides “financial services” issue

The High Court was recently brought into play to settle a dispute between IR and an insurance company, over whether the premiums to be charged by the latter to its customers on two particular policies, should be subject to GST output tax or not.

The products on offer, had been designed to mitigate risk for the insured in respect of repayment obligations they may still be faced with in respect of motor vehicles they had purchased on credit, should certain insured events occur, like the write-off of the motor vehicle following an accident for example, and the pay-out received from a comprehensive motor vehicle insurer did not cover the outstanding loan balance.

The insurance company had taken the view, that the premium related to the provision of financial services in terms of dealing with any remaining credit facility obligations of the insured, and consequently was an exempt supply for GST purposes. IR had taken a different view and the disputes process between the parties had been unable to reach a conclusion.

The High Court found in favour of IR, stating:

• apart from brokerage/intermediary services, it was not Parliament’s desire to exempt services connected with the provision of financial services that were not themselves financial services;
   
• the nature of supply for GST purposes was determined by the contractual relationship between the supplier and the recipient of the supply. The fact that the services supplied may benefit another party in relation to a contract of financial services did not transform what were, in this case, insurance services provided pursuant to a contract of insurance into exempt financial services;
   
• the financial service in question was the provision of a contract of insurance. The parties were the insurer and the insured. A contract of insurance was not a credit contract; and,
   
• the supplier of the service that is connected to, or involved in, a financial service provided by someone else is not itself the supplier of financial service.