Introduction

On Christmas Day last, the President signed into law the Finance (Tax Appeals) Act 2015 which heralds a new approach as to how tax appeals will be dealt with in the future. The purpose of this article is to outline some of the practical aspects of the tax appeals system and to highlight some of the main changes brought about by the new Act.

Instructing a lawyer in tax appeal cases

Tax assessments rarely arrive out of the blue. There is usually an intervention in the form of a Revenue audit or query necessitating the taxpayer to put his/her best foot forward in terms of meeting the case prior to the issuance of an assessment to tax. It is at this stage – before the issue of the assessment to tax – that the matters in contention ought to be resolved including, where necessary, the intervention of legal advisors. It is in both the taxpayer’s and Revenue’s interest that this be so. A stitch in time saves nine. There seems little point in establishing, years later and with a lot of money spent litigating, the exact same thing that could have been worked out by way of a timely legal opinion before the notice of assessment has been issued.

There are always going to be cases, however, where there is a stark divergence of opinion between the taxpayer and the Inspector of Taxes even after the law has been gone through thoroughly. Twas always thus and always thus twill be. In those circumstances, the main avenue of progression for a taxpayer is the appeals system.

Whenever I get a call from an accountant or a solicitor regarding a potential appeal, my first question is always “Has an assessment been issued and, if so, when?” This is because the appeal deadline is tight – it is listed on the notice of assessment itself. Late appeals are very difficult to mount. Having established that an appeal can be made within time, my next question – after a brief discussion aimed at establishing whether it is a real or imaginary appeal matter – is “How soon can you get me the papers?” I ask this question because the notice of appeal needs to list all available grounds of appeal and it is the case that failure to state an available ground of appeal may mean that unstated ground cannot be relied upon at the appeal hearing. It is only by fully engaging with the matter at issue that a lawyer can hope to identify all possible points of appeal.

Tax cases can turn on law that is not obvious in the taxes statutes (e.g. company law, contract law, land law, EU law, probate law, constitutional law, human rights law, rules governing the interpretation of statutes etc.). Because of the breadth of legal issues which ought to be set forth in the notice of appeal, the time between the date of the assessment to tax and the delivery of the appeal notice is vital. A practitioner in receipt of an assessment to tax for which there may be grounds for appeal ought not sit on same for a few weeks before commencing the work needed to file a proper notice of appeal.

Preparing for the tax appeal hearing

Taxpayers are often taken by surprise to learn that it is the taxpayer who has to prove that they do not owe the tax set forth in the assessment to tax. The taxpayer usually has to give evidence at the appeal and call witnesses of fact to support their own returns. Well in advance of the hearing of the appeal, the accountant must sit down with the legal team and work out how the taxpayer’s case is going to be proved and identify the witnesses and documents required to do so. Together with the vital evidence of fact, the legal position is also key. The lawyers will, in conjunction with the accountants, research all of the available legal authorities in order to produce a set of written legal submissions which, in conjunction with the evidence to be offered by the taxpayer, ought to lead to a satisfactory outcome.

On the day (s) of the hearing, the taxpayer will find him/herself in a court room setting. It is a very formal process. The taxpayer will give his/her evidence and will then be cross examined by Revenue’s barrister. The cross examination will usually be robust and may be rough at times. If the taxpayer has a weak factual case or is attempting to stretch credulity to its limits, the cross examination from Revenue’s counsel has the potential to demolish the taxpayer’s case unless the law is squarely on the taxpayer’s side.

Tax appeals – the numbers

There are very few official statistics regarding the operation of the tax appeals system. Revenue’s 2013 Annual Report shows that just 44 tax appeals were heard in that year. Revenue won c. 75% of those cases. In the same year, there were eleven Circuit Court tax cases and Revenue won around 90% of those. Given the large number of Revenue audits and compliance interventions annually, it can hardly be said that the tax appeals system is overused. Most cases are settled following interaction between the relevant parties. Going on these 2013 figures, it is rare that a potential appeal case needs to go to a full hearing.

“New” tax appeals system

With the available space herein, I outline the main provisions of the new Act. Practitioners should consult the Act and any implementing measures introduced by the new Tax Appeals Commission when dealing with an appeal case from now on.

Firstly, the “new” tax appeals system is broadly similar to the system that has operated heretofore. The taxpayer still has to prepare a notice of appeal and still has the burden of proving (there are exceptions to this) that the taxpayer does not owe the tax assessed.

The notice of appeal will need to be issued to the Appeal Commissioners’ office rather than to Revenue as was the case previously. The notice of appeal still needs to state all available grounds of appeal “in sufficient detail for the Appeals Commissioners to be able to understand those grounds” and it is the case – as heretofore – that failure to set forth a ground of appeal in the notice of appeal may be fatal to any attempt to rely on the same ground at hearing. Practitioners should have section 949I of the new Act in front of them when preparing notices of appeal so that all required information is present in the notice.

The new Act is practitioner and lawyer heavy to a greater extent than heretofore. At present, Revenue and the taxpayer exchange written submissions before the hearing date. The new Act (section 949Q) says that the taxpayer may be called upon to provide a “Statement of Case” to include a statement of facts, list of witnesses, details of evidence to be given by each witness, documents to be relied on at appeal, relevant case law etc. This requirement, if invoked, will add to the costs of a hearing for the taxpayer. Furthermore, there is nothing in the Act that mandates Revenue to provide the same information meaning that, if the “Statement of Case” requirement falls only upon the taxpayer, it is the case that Revenue will be handed a significant advantage prior to the hearing itself.

The new Act provides that the appeals hearing be heard in public unless the parties say otherwise. Section 949Y provides that the taxpayer will need to positively state that they require the hearing to be held in private. I know of no situation where a taxpayer would wish their private details (which can often be very private e.g. health/relationship status etc.) to be ventilated in public. The new law requires practitioners to positively inform the Appeals Commissioners that they wish the taxpayer’s appeal to be heard in camera.

If a taxpayer loses an appeal before the Appeals Commissioners, the taxpayer used to have the right of appeal to the Circuit Court. The appeal to the Circuit Court was a new hearing i.e. the taxpayer could call the same or more witnesses and could introduce more documents and arguments and as if the hearing before the Appeals Commissioners had not taken place. The appeal option to the Circuit Court was an important safeguard for a taxpayer who might, for logistical or other understandable reasons, have been wrong-footed at the Appeals Commissioners stage.

Going forward, the new Act removes this option of appeal. This writer believes the removal of the Circuit Court appeal option in tax appeals is rather short-sighted. Given that there were just 11 Circuit Court cases in 2013, it is the case that the further appeal option was not overused. In 2013, one taxpayer won all of his case at the Circuit Court stage and one taxpayer won part of his case. The practical effect of the removal of the Circuit Court appeals option is that every appeal from now on will need to be doubly comprehensive because, going forward; there is only one fact collecting stage in the tax appeals process.

Under the new Act, the sole avenue for appeal from an Appeals Commissioners decision is by way of an appeal on a point of law to the High Court. As there is no other appeal option, the notice of appeal in the first place will need to be, regarding legal points, sufficiently robust. On appeal to the High Court, the parties will be broadly stuck with the facts and arguments made at the appeal hearing.

The transitional arrangements broadly say that the new arrangements apply to current appeals. So, if an appeal has already been made by the date of the commencement of the new Act, the current appellant will be bound by the new Act, including the losing of the right to appeal to the Circuit Court in most cases.

Conclusion

In the round, the system will be as before. There are some welcome tweaks, however, the main one being the mandatory publication of appeals decisions which will, in time, greatly assist the tax advising public.

Eoin O’Shea BL, FCA, AITI is a Chartered Accountant and practising barrister, specialising in commercial litigation.

Email: eoshea@lawlibrary.ie