Yesterday the IRD released its draft tax avoidance interpretation statement, which is largely based upon the Supreme Court's judgments and approach to the law in the Ben Nevis and Penny and Hooper cases.

PricewaterhouseCoopers tax partner Geof Nightingale said the message is clear - transactions or financial products that have any sort of tax benefit could be at risk, even if they comply with the letter of the law.

"The way it works is you may have structured a transaction so it meets all the tax laws but if Inland Revenue doesn't like the outcome from a tax perspective it can change it backwards.

"If you're advising on a transaction you've got to ask whether Parliament would have liked that outcome."

The new guidance on the issue is "very helpful" but the IRD now has the "benefit of hindsight as opposed to the certainly of black letter law," Nightingale said.

"For businesses structuring transactions they're no longer going to be as sure as a few years ago as to where the boundary lies."

He said the situation created uncertainty and would encourage taxpayers to act more conservatively, potentially avoiding lower-tax options for fear of later being accused of tax avoidance.

Asked what effect it would have on managed funds, Nightingale said, "That's a very good question and I don't know the answer.  That's exactly the kind of area where this sort of thing might have a chilling effect.

"The best example is cash PIEs - on the face of it they offend tax avoidance rules but because [former Finance Minister] Michael Cullen came out and said very clearly they are deliberately doing this they're ok.

"In the absence of really clear guidance from Parliament you've got to guess."

He said this risk could potentially flow through to financial advisers if they recommended products that complied with the letter of the law but were later found by the courts to have been tax avoidance.

"That's got to be a risk in terms of what people's expectations are, although it will all depend on the contracts between advisers and their clients.

"If an adviser says invest in this way because of tax benefits that brings up the tax avoidance issue so you've got to work out whether it was intended by Parliament or not, which is never easy."