New Zealand Law Society - Law Society disagrees with IRD view of horse racing treatment

Law Society disagrees with IRD view of horse racing treatment

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The New Zealand Law Society says it does not agree with Inland Revenue's view on the tax treatment of racing syndicates or partnerships.

The Law Society has provided its comments on IRD's Question We've Been Asked - Goods and Services Tax - Whether a Racing Syndicate or Partnership Can be a Registered Person.

While acknowledging that many clubs, associations and syndicates associated with sporting endeavours do not operate or have the objective of operating as a business, it says it disagree with IRD that they can be excluded from tax registration.

"The Law Society does not agree with the Commissioner's view that, in the absence of the taxpayer being able to establish the criteria [set out in the QWBA], the racing of horses as a standalone activity by a racing syndicate or partnership is a private recreational pursuit or hobby, and is therefore excluded from the definition of a taxable activity," it says.

The lack of a business objective does not qualify horse racing syndicate bodies from being eligible to register for GST. If the criteria set out in the QWBA were applied to a sports club/association, the racing bodies would also most likely be excluded from being eligible to register for GST on the basis that they were not carrying on a taxable activity.

The Law Society says the QWBA shows inconsistency between the views it expresses and the Commissioner's position in a Tax Information Bulletin.

It recommends that the QWBA be redrafted to outline the factors that the Commissioner considers are most likely to be indicative of a racing syndicate or partnership conducting a taxable activity rather than stipulating a list of criteria that must be present.