This week’s High Court judgment in favour of TrustPower against Inland Revenue is directly relevant to any business which spends money on resource consents and may also apply to other costs incurred in investigating the acquisition or development of new assets, especially where an asset eventually is acquired or developed.
The case emphasizes the tax benefit of treating as much as possible of that process as investigation or feasibility. Formal or final commitment should be delayed until the last possible moment, at a point when failure is almost inconceivable.
But any business seeking to rely on this case will need to understand the facts of it, before drawing any conclusions about how it might apply. And Inland Revenue may appeal.
- establishing a kind of in-principle feasibility, the last element of which was applying for resource consents
- more detailed work such as the development of civil engineering and designs, calling for tenders from manufacturers, and analysing economic feasibility more carefully, and finally
- preparation of a business case for consideration by the Board. Only once Board approval was obtained would TrustPower be committed to a project.
Were the resource consents assets in their own right?