Two accountants serving New Zealand's longest ever jail sentences in a tax case will be allowed to appeal one part of it in the Supreme Court.
Wellington's David Ingram Rowley and Barrie James Skinner were jailed in 2012 for eight and a half years and eight years respectively after being found guilty of dozens of charges of fraudulently using a document to obtain a pecuniary advantage, attempting to pervert the course of justice and tax evasion.
• Accountants jailed over tax fraud
During the pair's time as directors of accountancy firm Tax Planning Services they used sham transactions to create tax deductions and credits for some of their clients, the High Court heard during their sentencing.
They filed false income tax and GST returns on behalf of their clients for goods and services that were never provided, giving their clients an invoice for the claim, but receiving most of the payment back.
Their clients' tax liability was reduced, meaning the pair could keep the difference.
Over the course of the five years they claimed fictitious expenses of more than $9 million, of which they could personally keep somewhere between $1.8 and $2.3 million.
Skinner personally gained three quarters of the $2.3 million over the five-year period and Rowley gained a quarter of that.
The judge who tried the men, Justice Stephen Kos, also found them guilty of tax evasion because they had not returned as income their shares of the benefits of the frauds and therefore had supplied false information to IRD.
Challenges to their convictions were dismissed by the Court of Appeal last year.
However, the Supreme Court this afternoon agreed to hear an appeal on the tax evasion charges.
The pair argued that income returns are deemed to be correct unless and until they are set aside under the Tax Administration Act.
On this basis, the applicant contends that it was not open to the Crown in the criminal proceedings to allege that the returns were not correct. We grant leave to appeal in respect of this ground.
"On this basis, the applicant contends that it was not open to the Crown in the criminal proceedings to allege that the returns were not correct. We grant leave to appeal in respect of this ground," the Supreme Court said today.
It denied leave for other parts of the appeals and Rowley's challenge to his sentence.
The court noted that if the appeal on the tax evasion charges succeeded, however, it may be necessary to revisit the sentences imposed.
"The dismissal of Mr Rowley's application for leave to appeal against sentence is without prejudice to that possibility," the judges said.