The Finance (Tax Appeals) Act 2015 was commenced by order on 21 March 2016 thereby creating the new Tax Appeals Commission (TAC) which replaces the former Office of the Appeal Commissioners.

The purpose of this article is to discuss some of the practical issues arising and to comment briefly upon the first eight judgments published by TAC.

Practice related to existing appeals already notified to the Appeals Commissioners

Appeals in existence at 21 March 2016 and already notified to the Appeals Commissioners will be dealt with in accordance with the legislation under the new 2015 Act. Importantly, the right of appeal to the Circuit Court that previously existed will not apply to existing appeals which were not at least partly heard by 21 March 2016.

Practice related to existing appeals not already notified to the Appeals Commissioners

On 21 March 2016 a number of cases existed in which appeals had been made to Revenue but which had not yet been transmitted to the Appeals Commissioners. Section 31 of the 2015 Act requires Revenue, in those circumstances, to write to the taxpayer to ask whether he/she wishes to settle the Appeal or, alternatively, transmit the case to the TAC. Revenue can also decide to withdraw its assessment. A report in the Irish Times on 14 April 2016 indicated that there were 3,000 taxpayers involved in this procedure – an unexpected large number.

Tax briefing 37/2016 provides that Revenue will allow the taxpayer 30 days to elect to settle the appeal or, alternatively, to progress with the appeal. The tax briefing indicates that a further 3 months will be allowed by Revenue for settlement talks. These timeframes are not set out in the legislation and Revenue has the power to extend them.

Practice relating to making New Appeals

Since 21 March 2016, taxpayers must make their appeals directly to the TAC rather than through Revenue as was previously the case. The TAC has provided a standard notice of appeal form on its website together with guidance notes. Once completed, the appeal notice needs to be either posted or emailed in. The TAC says that work is being done to introduce an online appeal system.

Together with the taxpayer’s contact details etc., the taxpayer is also asked to provide details of the relevant legislation and case law likely to be in question. If not known, these details can, according to the form itself, be left blank.

As before, the grounds of appeal must be stated with, according to section 949I TCA 1997 “sufficient detail for the Appeal Commissioners to be able to understand those grounds”. The notice of appeal contains the, ominous but soundly legally based, warning that “Please note that Section 949I (6) TCA 1997, as amended, provides that a party shall not be entitled to rely on any grounds of appeal that are not specified in this Notice unless the Appeal Commissioners are satisfied that the ground could not have been reasonably stated in this Notice.”

A new requirement of the 2015 Act (as set forth at Section 949D) is that a taxpayer wishing to act through a representative must provide the TAC with a written authorisation in relation to same. The TAC has requested said authority to be given with the notice of appeal. A copy of the notice of assessment must also be appended.

One ‘innovation’ in the 2015 Act is the possibility of public appeal hearings. Section 949Y TCA 1997 provides that public hearings are now the default situation but that a taxpayer can elect for a private or partly private hearing. The notice of appeal contains a set of tick-boxes for the taxpayer to make such an election.

Revenue’s revised Tax Appeals Manual importantly states in paragraph 2.4:- “The fact that appeals are to be made directly to the TAC in the first instance and that the TAC will have full control over the listing of appeals does not preclude the continuation of settlement discussions between Revenue and appellants after an appeal has been made.”

The TAC has the function of deciding whether or not to accept an appeal after having sought the views of Revenue and having given the taxpayer an opportunity to comment on any Revenue objection. The 2015 Act gives the TAC the power to reject an appeal that is, in its view “without substance or foundation”. Going forward, if the TAC rejects an appeal, an aggrieved taxpayer can only proceed via a High Court judicial review of the decision to reject.

The TAC website contains a standard form for making a late appeal. The notice of late appeal must include information detailing why the late appeal satisfies the grounds set forth at section 949O TCA 1997 i.e. that the appellant was prevented by “absence, sickness or other reasonable cause” from appealing within the required period.

TAC Rules of Procedure

The 2015 Act provides that the TAC shall publish its rules of procedure on its website and the TAC did so on its first day of operation.

Publishing Determinations

One major and very welcome innovation is that written TAC determinations will be published (with the names etc. redacted in most cases) on the TAC website. The former legislation gave the Appeals Commissioners the authority but not the obligation to publish and, over the years, a few dozen important rulings were published.

Eight determinations of the two new Appeals Commissioners (which comprise the TAC) have been published at the time of writing. Some cases were heard under the former legislation and are published because the TAC has chosen to publish them. This publication represents a good start and a good taste of things to come.

The first published determination (01TACD2016) concerned the appeal of Revenue’s denial of a taxpayer’s claim to an interest deduction from Case V rental income. For the taxpayer to validly claim the said deduction, in the circumstances of the case, there needed to be a lessee in place using the land for the purposes of a trade. The taxpayer’s difficulty was in proving the foregoing in circumstances where there was no written lease, no bank statements, no receipts and no evidence given by the person alleged to have leased the land as to whether vegetables were grown there as was alleged by the taxpayer. Not surprisingly, in my view, the Commissioner came to the following view:-

• “In tax appeals before the Appeal Commissioners, the burden of proof rests on the Appellant. The Appellant must prove his/her case on the balance of probabilities
• ……
• In my view, the evidence adduced at hearing on behalf of the Appellant was insufficient to establish, on the balance of probabilities, that the premises were “occupied by a lessee” within the meaning of section 105 TCA 1997 for the relevant tax years of assessment.”

The foregoing is, in the writer’s experience, a common outcome in tax appeals where the outcome depends mostly on the evidence. The above sentences are nearly boilerplate in evidence-based appeals where the taxpayer has, for whatever reason, difficulty finding external evidence to support their case. In the above case, it might have been possible for the taxpayer to call evidence from the alleged lessee him/herself or external evidence as to the receipt and/or use of cash or evidence as to the sale of vegetables from the plot of land involved. Or maybe not.

The second determination by TAC (02TACD2016) concerned the availability of business relief for capital acquisitions tax. The appellant had inherited a pharmacy business and, while Revenue allowed the ground floor retail premises for the purposes of calculating business relief, the said relief was denied in respect of the upper floor. Careful evidence was given on the appellant’s side that the upper floor was used for storage, staff changing, staff bicycles and doctor consultations, that no-one lived there and that there was no separate entrance or a kitchen. The Commissioner found on the evidence (which was corroborated by another witness and accepted, at least in part, by Revenue) that the upper floor was used wholly and mainly for the purposes of the business. The appellant also challenged Revenue’s valuation of goodwill but did not provide an alternative valuation to that of Revenue’s valuer and therefore did not succeed on that point. The appellant partly won his/her case.

The third and fourth determinations (03 & 04 TACD2016) concerned capital acquisitions tax. A cash gift was exchanged between siblings and duly assessed to CAT. The donees both claimed on appeal that they had given consideration for the gift by previously allowing the donor to live rent free in their deceased parents’ house and by previously agreeing to take a reduced inheritance from their parents so that the donor could inherit more. The Commissioner found there to be no connection between the taxable gift in question and the prior “gifts” going in the other direction i.e. the legal proposition that “past consideration is no consideration” applied. The taxpayers’ appeals were dismissed.

The fifth determination (05TACD2016) related to a claim by a charity for remission of VAT and VRT on vehicles used to provide services to people with disabilities. The Commissioner determined the matter, with the consent of the parties, without an oral hearing. The charity was not a “qualifying organisation” under the relevant regulations and the Commissioner so found. On a happier note, the definition of “qualifying organisation” has since been amended to include the appellant charity. Helpfully, the Commissioner had cause to say in the judgment that “It may be that the Appellant is now a qualifying organisation for the purposes of the amended 1994 Regulations, and might accordingly succeed in a new application for remission or repayment of VAT and Vehicle Registration Tax. However, that question is not before me and so I refrain from expressing any view thereon.”

The sixth determination (06TACD2016) concerned the deductibility for income tax of a lump sum payment made in consequence of a marital separation. The appellant had been obliged to make a lump sum payment of €38,000 to his partner spread out over 2 years. The payments had been made over 2 years and were claimed against income tax. The claim was refused by Revenue and Revenue had refused the appellant’s right to appeal. The first job of the TAC was to decide whether Revenue had validly refused the appellant’s appeal. The TAC decided that Revenue, when refusing the appellant’s appeal, had gone into the merits of same which Revenue was not entitled to do. In those circumstances, the decision of Revenue to disallow the appeal was overturned by TAC. The TAC found that as the payments were of the nature of being a lump sum rather than periodical, the appellant was unable to claim same as against his income tax.

The “06/2016” determination, however, might perhaps be better remembered arising from a claim made by the appellant that Revenue had assured the appellant, before his deal was made with his wife, that the amounts payable to his wife would be deductible for income tax purposes. In relation to this “legitimate expectations” claim, the TAC found that such matters do not fall for consideration within the TAC’s statutory jurisdiction. The TAC found that claims for legitimate expectation, estoppel, or negligence on behalf of Revenue, or judicial review points, do not fall within the TAC’s remit. Extensive judicial authority was cited by the TAC for the foregoing proposition and the writer does not disagree with the TAC on this point. Practically speaking, this finding means that the taxpayer who has a case based on what was said to him/her by Revenue must firstly lodge his appeal within the timeframe set forth by the assessment and secondly launch High Court proceedings (whether by way of judicial review or plenary proceedings) to have the legitimate expectations point determined separately to the TAC process. It should be noted that High Court judicial review proceedings are subject – in most cases – to a three month time limit. In any event, the said judgment says, crystal clear, that the TAC is not open for business for judicial review/legitimate expectation points. In that regard, the judgment is to be welcomed as being a definitive clarification in that regard for the new TAC.

The seventh determination (07TACD2016) concerned the valuation of a Bentley Continental GT V8 coupe for VRT purposes. The taxpayer was partly successful.

The eighth determination (08TACD2016) was an interesting case. A CGT deal had been made with Revenue. The taxpayer wished to go beyond the deal in a manner that, according to the TAC, was impermissible. The writer has no quibble with said judgment in the circumstances and there seems to be no matters which would give rise to a useful precedent.

In summary, the first eight cases published by the newly appointed TAC show that two taxpayers were partly successful, five lost outright and one was unsuccessful but received a favourable ruling in respect of a possible future application for relief. I have no quibbles with the outcomes reached by the Appeal Commissioners in any of the eight cases published thus far. The said cases show that a successful appeal is a product of both evidence and the law. On the legal side, the cases involved a significant amount of non-tax law e.g. the requirements for a valid lease (case 1), the law of contract/consideration (cases 3 and 4), and the interpretation of statutes (case 5). Case 6 which set forth the limits of the jurisdiction of the TAC will, no doubt, be quoted in many High Court cases going forward.

In summary, the TAC can be said to be off to a good start.

The TAC has its own website www.taxappeals.ie and Twitter account @IRLTaxAppeals. Practitioners interacting with the TAC will not need to e-mail @revenue.ie addresses as was the case with the former Appeals Commissioners. The TAC’s general email address is now info@taxappeals.ie.

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

Email: eoshea@lawlibrary.ie