Trustpower tax fight heads to Supreme Court

Wind turbines at one of Trust Power's wind farms near Palmerston North Photo/Mark Mitchell

Electricity retailer and generator Trustpower has won the right to take its $8.9 million tax battle to the Supreme Court.

The Court of Appeal in June overturned a decision on whether $17.7 million Trustpower spent in applying and getting resource consents for four projects was tax deductible.

The projects in question was a hydro scheme at Arnold River on the South Island's west coast, a Southland wind farm, a hydro project on the Wairau River and a wind farm west of Dunedin.

Inland Revenue argued these resource consents were intangible capital assets and what was spent in obtaining them was capital expenditure and therefore not tax deductible.

Trustpower then filed court action in 2011 against Inland Revenue and Justice Pamela Andrews found in favour of the electricity company last November.

But Inland Revenue challenged that ruling and the Court of Appeal overturned it.
IRD refusing Trustpower's tax deductions for 2006, 2007 and 2008 was confirmed the appellate court's decision.

The tax fight is now set to go another round and after Trustpower was given leave on Friday to take the case before the Supreme Court.

A note in Trustpower's accounts earlier this year said that if IRD won the dispute would be liable to pay $5.9 million in tax and interest of $3.0 million.

However, there could also be a flow on effects for other tax years.

"Inland Revenue has reassessed the 2009 and 2010 [tax] years and has made further claims. Trustpower has disputed this assessment. The dispute has been lodged with the High Court but is on hold pending the 2006 to 2008 dispute," notes in Trustpower's accounts said.

If IRD was completely successful for these additional years Trustpower says it would have to pay a further $6.4 million.

"The impact of these adjustments on the tax expense in the income statement is difficult to estimate but is unlikely to exceed $2,500,000 for all years up to March 2015," the note said.