A change in tax approach to feasibility expenditure
The Court of Appeal has overturned a High Court decision which would have allowed Trustpower Limited to deduct
expenditure incurred in assessing the feasibility of capital projects before any commitment was made to seek resource
consents.
If the case is correct, it suggests that expenditure incurred in assessing the feasibility of a possible capital project
or capital investment is not deductible.
The Appeal Court's approach departs from how many taxpayers have treated this type of expenditure to date, and from
Inland Revenue's policy as reflected in Interpretation Statement 08/02: Deductibility of feasibility expenditure.
As yet, it is unclear whether Trustpower will appeal.
ENDS