Sovereign to pay $82m
Sovereign has lost its last bid to appeal a long-running dispute with Inland Revenue and must pay the department $82 million.
Wednesday, June 18th 2014, 6:00AM
The company confirmed its application to the Supreme Court to seek leave to appeal a Court of Appeal judgment on its historical tax treatment of reinsurance arrangements had been declined.
“This decision brings an end to the proceedings,” a spokeswoman said. “The issue is a long-running one involving the technical application of the income tax rules to reinsurance contracts. There is no allegation of tax avoidance.”
She said Sovereign had disclosed the issue in its financial statements since 2004.
“Full disclosure has also been made to Sovereign’s financial strength rating agency, AM Best, and the outcome of the Court of Appeal proceedings will not impact the company’s financial strength rating.”
The financial years subject to the Court proceedings are 2000 through 2006 but the matter relates to reinsurance contracts that were entered into in the early 1990s, before Sovereign was acquired by ASB and CBA.
Its position was that an accrual regime only applied to a deferral element of a transaction.
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