Three cases on zero-rating of going concerns in New Zealand - a not so simple concept

The New Zealand Goods and Services Tax Act 1985 permits the sale of a taxable activity as a going concern to be zero-rated. This was intended to be a concession to ease the cash-flow cost for purchasers of a taxable activity. For a supply to be zero-rated as a going concern, the Act requires, among other things, that the parties to the transaction be GST-registered and that their intention (that the supply be a going concern) be "in writing". This article examines three recent cases in which the courts ruled on these two requirements. It is clear from these decisions that the courts have interpreted the two requirements strictly and that a lack of attention to detail by taxpayers (and their advisers) when concluding agreements for the sale of a taxable activity can have significant financial implications for the supplier and purchaser.