Taxman seeks to liquidate two South Canterbury building firms

Saturday, 13 April 2024

Construction companies have been told to meet their tax obligations or face the consequences. (File photo)

Inland Revenue is seeking to put two South Canterbury building companies into liquidation, following a stern warning to those in the construction industry who have fallen behind on their tax obligations.

Earlier this week, the tax department sent out a “last chance warning” to construction companies to sort their taxes out or face enforcement action.

Its statement, issued on Tuesday, told those in the sector to “cut your excuses and pay your tax”.

The department had taken a “softly, softly” approach during the pandemic years, but that had changed, Inland Revenue’s Richard Philp said.

Emails and letters were expected to be sent to 40,000 construction companies with outstanding debt, overdue tax returns, or both, in the coming months.

On Monday, an application by Inland Revenue to place two South Canterbury companies, K J McIvor Building Ltd and KJMB 2022 Ltd, into liquidation will be heard in the High Court at Timaru. The applications were filed on January 16.

Both companies operate in the building and house construction industry.

Inland Revenue says it took a “softly, softly” approach during the pandemic years, but that has now changed.

KJMB 2022 Ltd is wholly owned by Kerry McIvor, of Fairlie. McIvor is the majority shareholder and sole director of K J McIvor Building Ltd.

In March, Timaru-based building company New Zealand Carpentry Ltd was placed into liquidation following an application by the company that owns Mitre 10 Mega stores in Timaru, Ōamaru and Ashburton.

In his first report to creditors and shareholders, released this month, liquidator Iain Shephard, of BDO Wellington, listed the known amount owed to creditors at just over $48,000.

Rangitata MP James Meager said he was aware of the struggles many business owners were facing, and he believed there was more hurt to come for some.

“Higher interest rates, a result of the fight against inflation, are making it harder to do business.

“I think the big struggle is going to be for those whose provisional tax will be high but [whose] cashflow is not great at the moment.”

Meager said he had met with one building company owner to discuss the factors that had led to its closure. Although he had not fielded any other direct approaches from business owners, he was aware it was a tough time.

“Generally every business I talk to are tightening their belts and thinking carefully about their spending, what they can afford to invest in, and where they’re getting that next customer from,” he said.

“I am a little concerned about the sluggishness of the local economy, especially for businesses directly tied to the [agriculture] sector.”

Meager said the Government’s job would be to get its own spending under control, reduce inflation and make it easier to do business.

“Opening up opportunities for investment and attracting capital from offshore is also going to be important.”

Kitchens Direct and associated companies were placed into liquidation in October.

For South Canterbury, implementing the free-trade agreement with Europe and pursuing “more and better trade agreements with our Indo-Pacific neighbours” would be key, he said.

He did not know whether the numbers of businesses being put liquidation in his electorate was higher than normal but said he was interested in learning the numbers.

In October 2023, long-running Timaru business Kitchens Direct (NZ) Ltd and three other companies linked to it were placed into liquidation.

In his first report, liquidator Mohammed Jan, of Liquidation Management, said director Karl Te Raki told him a number of factors had led to the failure of the companies, including a steady loss of customers, increases in material and labour costs, and the ongoing effects of the Covid-19 pandemic.

Last month, Jan said there was not enough money to pay out unsecured creditors, but there were other recovery options that would be pursued “for the benefit of creditors”.

He said more information would be available in his next report due on May 8.

In March, Timaru employment agency Staff Services Ltd was placed into liquidation owing $350,000 to Inland Revenue and $100,000 to an unsecured creditor.

That came just two weeks after the owner of South Canterbury’s Waipopo Orchards was placed into receivership owning millions of dollars to a bank.