Inland Revenue crackdown on construction sector nets $89m

Friday, 13 December 2024

Inland Revenue has targeted 40,000 companies in the construction sector with tax debt and encouraged them to pay up or make arrangements to pay off debt.

A crackdown on construction companies has seen more than $38.8 million in outstanding taxes paid, and arrangements made for a further $50.5m.

In April, Inland Revenue sent out a “last chance warning” to construction companies who had fallen behind in their tax obligations to sort them out or face enforcement action.

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

On Friday, Inland Revenue spokesperson Gay Cavill said the department had targeted nearly 40,000 companies in the sector with debt and encouraged them to “either make a lump sum payment in full or set up instalment arrangements to pay off their existing debt”.

“What we got was 24.16% of that group (9274) made lump sum payments totalling $38,855,281,” Cavill said.

Inland Revenue held site visits in nine main centres in early July and spoke to more than 200 construction businesses.

“And nearly 1500 (3.87%) set up instalment arrangements valued at $50,506,511.00.”

The department had also run site visits in early July in nine main centres across the country, including in Auckland, Hamilton, Wellington, Hawkes Bay, Christchurch, Dunedin and Queenstown.

“We spoke to more than 200 construction businesses. Our message was that IR will help customers willing to do the right thing, while making it clear that customers who do not comply will be detected.”

She said 55 customers had been selected for an audit review as a result of that work and risk review letters had been sent out at the end of July.

Insolvency experts are picking that trend to continue. Liquidations picked up around 2021-22 after tracking downward for more than a decade.

“As of 31 October, we have finalised one case, with a total discrepancy of $812,755.”

The department had 71 cases in progress.

Liquidations on the rise, IR taking action across other sectors

The latest data released by Centrix, a company which collects data on liquidations, on December 3, showed the number of companies liquidated across New Zealand increased by 27% year-on-year.

The figures for Canterbury, which include South Canterbury, showed 268 companies were liquidated during the 12 months to October 31, up from 230 in the previous 12-month period.

A breakdown of those liquidations by industry showed 32% were in the construction sector, 11% in hospitality, 9% in property, with retail and manufacturing both at 7%.

In South Canterbury, the owner of two Fairlie-based building companies, which owed creditors more than $2.4m, was declared bankrupt in September.

K J McIvor Building Ltd and KJMB 2022 Ltd, were put into liquidation on April 15 at the request of Inland Revenue.

A failue to account for taxes was cited as the reason three South Canterbury companies were placed into liquidation in recent weeks.

KJMB 2022 Ltd was wholly owned by Kerry McIvor, of Fairlie. McIvor was the majority shareholder (95%) and sole director of K J McIvor Building Ltd.

That liquidation was just one example of Inland Revenue taking action.

In three other recent cases, it was Inland Revenue that filed an application to have companies put into liquidation, and the reason given for the failures of the companies was all the same — those in charge failed to account for tax.

Medical Facilities Serrvices Ltd, which provided cleaning services, was put into liquidation on September 30 by application of Inland Revenue. The sole owner and director of the company was Diane Oliver of Cave.

The official assignee was appointed to oversee the liquidation which was completed on November 18.

In the final report, the liquidator said the company was not trading at the time of liquidation and had no assets so there no distributions were made.

Inland Revenue applied to have three more companies put into liquidation over unpaid taxes at the High Court in Timaru in recent weeks.

Inland Revenue, which was owed $159,972, was the only creditor listed.

“The cause of this liquidation appears to be related to a failure to account for taxation.

“Investigations through various databases and other available avenues, has not recovered any assets of interest for creditors in this liquidation.”

On November 4, Ōamaru-based log haulage company, Campbell Haulage Ltd, was placed into liquidation in the High Court at Timaru at the request of Inland Revenue.

The official assignee was also appointed to oversee that liquidation. Its first report, released on November 27, showed Inland Revenue as the only creditor. It was owed $101,143.

The liquidator said the company had $6.49 available, but it was investigating whether there were any further assets available to pay creditors.

“The cause of this liquidation appears to be related to a failure to account for taxation.”

The sole director and shareholder of Campbell Haulage was owner and director Jason Campbell.

On November 11, Temuka-based transport company George Alice Holdings Ltd was put into liquidation owing more than $145k to Inland Revenue.

The company, which offered rural transport services, was incorporated in September 2017. Geremy Lester was the sole director and shareholder of the company.

The official assignee was appointed liquidator and had asked for anyone wishing to lodge a claim to do so via insolvency.govt.nz.