Judgment No 17/2018 – CGT and Income tax (dealing in land)

The appellant purchased a home in 2003 and sold it in 2004. The principal private residence CGT relief was claimed but refused. Revenue charged the appellant to income tax on the basis that the profit earned constituted a trading profit (EUR 708k profit). The parties differed on whether the appellant actually lived in the house in question. Significantly, for a particular six month period just EUR 97 was spent on electricity and the appellant’s explanation for same included that he had lived on takeaway pizzas and heated the house with turf. In respect of the trading nature of the transaction, the purchase and refurbishment of the property was financed by way of a 2 year interest only bank facility and the borrowers had confirmed to the bank that they were acting in the course of a trade and not as consumers. Revenue was successful in this case.

Judgment No 18/2018 – Income Tax – Child Carer Credit

The case concerned an application by the appellant for a set off of VAT as between an amount due for the July/August 2008 period and an amount recoverable for the November/December 2008 period. Revenue argued that, while the July/August 2008 payable sum was due and owing, the taxpayer’s ability to claim the offset was statute barred because of the four year rule. The appellant’s points were more complicated and included an argument that the statutory time limit of 4 years was contrary to the spirit of the VAT Directive. TAC sided with Revenue. This case is headed for the High Court for further argument.

Judgment No 19/2018 – VAT repayment claim and the 4 year rule

In April 2017, the appellant submitted VAT returns for the years 2011 and 2012 showing an amount of recoverable VAT. Revenue declined to process the repayment on the basis that same was statute barred via the four year rule and TAC so agreed with Revenue.

Judgment No 20/2018 – Income tax – travel and subsistence expenses

This is an interesting and important case concerning the right of a company to make tax free payments to an employee in respect of travel and subsistence. The employee worked on a succession of long term contracts requiring him to live away from home for extended periods. The employee was paid expenses in respect of rental obligations, travel costs and round sum subsistence in accordance with Revenue’s published guidelines. Revenue’s view was that the accommodation and travel expenses were not incurred “in the performance” of the duties of employment and were merely incurred to put the employee in a position to perform the relevant tasks. The TAC determined that it has no jurisdiction to review or apply the relevant statements of practice which grant tax free treatment in respect of travel and subsistence payments and the TAC further determined that the issue should be decided based on the law as set forth at, inter alia, sections 112/114/117/118 of TCA 1997 including the “wholly, exclusively and necessarily in the performance….” test. As the statutory scheme is very rigid and unyielding, the TCA determined that all of the expenses paid to the employee were taxable in the employee’s hands arising from the broad nature of the charging sections and that no tax deduction was available to the employee because of the rigidity of section 114. This situation is clearly unsatisfactory and inequitable. To deal with this impasse, legislative intervention is now required so as to put the long-standing non-statutory travel and subsistence regime on a proper legislative footing, as indeed was suggested by the TAC in its determination.

Judgment No 21/2018 – Income tax – company director

The appellant, a company director, owned 40% of a company’s shares and his salary was subject to PAYE deductions as normal. However, because the company failed to pay over the said deducted amounts, Revenue assessed the appellant to tax pursuant to section 997A TCA 1997 as if PAYE had not been applied. The appellant asserted that he was unaware that tax was not being paid over as required. As with previous determinations on this point, as the law is clear, TAC held with Revenue.

Judgment No 22/2018 – VRT

This appeal concerned the valuation of imported cars for the purposes of vehicle registration tax. The TAC upheld the assessment but the taxpayer has sought to appeal the determination to the High Court.

Judgment No 23/2018 – Fast food delivery drivers: Contract of service or Contract for services

Revenue assessed a fast food company to PAYE/PRSI on the remuneration of its delivery drivers. The case concerned whether such earnings constituted self-employment income of the drivers themselves, or whether the earnings were instead employment income. The judgment of the TAC stretched to some 53 pages. The evidence showed that the drivers signalled their availability each week by completing an availability sheet, that rosters were then drawn up by the company on the basis of said availability, that drivers were permitted to substitute for other drivers, that drivers were required to wear uniforms and carry a logo on their cars, that drivers supplied their own cars and phones, and that drivers were paid EUR 1.20 per food drop together with EUR 5.65 per hour for “brand promotion” i.e. for wearing the uniforms. Drivers clocked in and out and submitted weekly invoices which said invoices were prepared, in some cases, by the fast food company. As well as making deliveries, some drivers also undertook other work at the relevant premises e.g. folding boxes. A written agreement was in place describing the drivers as contractors and stating that the company was not liable to deduct PAYE/PRSI on the earnings. The TAC considered whether or not there existed a mutuality of obligation between the parties i.e. an obligation on the employer to provide work and a corresponding obligation on the employee to perform that work. Same is a necessary precondition to the existence of a contract of service. It was found that such mutuality did exist and was not invalidated by the clauses in the contract stating that the employer was not obliged to provide work nor the employee to accept such work. Having dealt with the mutuality point, the TAC considered the tests enunciated in the case of Henry Denny v. Minister for Social Welfare. It was found that the circumstances of work e.g. drivers’ lack of control, their integration into the business and their inability to profit from their work meant that their duties were not that of independent contractors and so the drivers were engaged by way of a contract of service. The unsuccessful appellant has indicated that it will appeal the matter to the High Court. In summary, the case is a very useful guide to the test involved in determining whether a person is a genuine contractor or not.

Judgment No 24/2018 – Income tax – Value shift in shares

The appellant established a company in 1985. In 2005, a subsidiary was incorporated. Thereafter, the subsidiary sold shares to the appellant, and to its parent company. The appellant paid EUR 200 for his shares. The parent company paid EUR 670,100. The articles of association of NewCo were changed to make the appellant the main beneficiary in the event of a liquidation of NewCo. NewCo was liquidated and Revenue duly issued a notice of investigation resulting in a charge to income tax on the basis of section 130 TCA 1997 (deeming the giving of an asset to a shareholder as being a distribution/dividend to that shareholder). In accordance with the decision of TAC No 10/2016, which held that a change in shareholders’ rights constituted a transfer of an asset (and, therefore, a deemed dividend according to section 130), the case was determined in favour of Revenue.

Judgments Nos 25 & 29/2018 – Income tax repayment – 4 year rule

The appellant filed his 2012 tax return in 2017. The return showed EUR 6,200 as being overpaid and the appellant applied for a refund. Revenue refused to process same in accordance with the 4 year rule set forth at section 865 TCA 1997 and the TAC duly upheld Revenue’s view (as TAC has done on umpteen occasions) The law on this issue is quite clear. Revenue have no jurisdiction to process a repayment claim outside of the designated temporal limit. A similar issue arose in judgment no 29/2018.

Judgment No 26/2018 – VRT – Transfer of residence

The appeal concerned the entitlement to an exemption to VRT when a person transfers their residence to Ireland from abroad. The appellant worked in the UK between 2013 and 2017 but his wife and children continued to live in Ireland. His personal ties remained in Ireland and he returned here regularly. On finishing his work in the UK, he brought home his UK car and claimed relief from VRT on the basis of transfer of residence. The applicable law is not overly kind to those whose personal and professional residences do not coincide and so the TAC held with Revenue in refusing the claimed relief.

Judgment No 27/2018 – Income tax – Incapacitated child relief

The appellant’s child suffered from chronic epilepsy and the appellant had claimed the incapacitated child relief for 2014/2015. The refusal of said relief formed the subject matter of the appeal. According to the medical evidence offered by the appellant (together, perhaps, with a humane reading of the legislation by the Commissioner), the TAC held with the taxpayer. The child in question is now 21 years of age and is, thankfully, living and working independently arising from the careful management of her condition.

Judgment No 28/2018 – Income tax – Incapacitated child relief

The appellant, a divorced husband, claimed the single person child carer credit in respect of his child. The said allowance had already been claimed by the child’s mother, who also was the nominated person to receive child benefit payments. According to the law, where custody of the child is divided between two parents following a split, it is the parent who receives the child benefit who qualifies for the child carer tax credit and, in those circumstances, the appeal failed.

Judgment No 30/2018 – VRT – disabled drivers

The appellant purchased a car in 2007. It was then adapted to take account of the appellant’s disability. The appellant claimed relief from VRT and VAT in 2016 (i.e. 9 years later) and said claim was duly processed by Revenue. The claim would have been more valuable if it had been made in 2007 because of the higher value. The appeal related to whether the appellant was entitled to claim the relief at 2007 levels rather than the 2016 rate. The conditions in the Act were clear in this regard and the appeal failed accordingly. The appellant asked for a case to be stated to the High Court on this point.

Judgment No 31/2018 – Help to Buy Scheme

The appellant purchased a piece of land containing a dilapidated house which she hoped to demolish and rebuild. She claimed the benefit of the Help to Buy Scheme for the building of the new home. The scheme provides for a tax refund for first time buyers. At issue in the appeal was whether, in buying the dilapidated house, the appellant ceased to be a first time buyer for the purposes of claiming the relief on the new build. The appellant argued, with the support of an architect’s report, that the house was uninhabitable and therefore did not constitute a “dwelling” according to the Act. The TAC held with the appellant on that point. In order for a building to constitute a dwelling, it must be habitable.

Judgment No 32/2018 – VRT on exports

The appellant sold her 10 year old Peugeot car to a dealer in Northern Ireland and claimed a repayment of VRT on export. One of the conditions of the export relief is that Revenue be provided with proof that the car has been registered abroad. In circumstances where the car was instead next registered to an Irish buyer, the required evidence was not forthcoming from the appellant and, therefore, the appeal failed.

Judgment No 33/2018 – CAT parental exemption

The appellant’s son died intestate and without a family of his own and, therefore, his estate devolved onto his father by operation of law. Section 79 of the CAT Act provides an exemption from CAT where a parent takes an inheritance from a child in circumstances where the parent had made a previous gift to the child. The appellant had, 5 years previously, withdrawn EUR 5,000 from his bank account to gift to his child at the time of the child’s birthday. There was no documentary evidence of the payment but the TAC was satisfied that a gift was actually made and, therefore, the appellant was entitled to the relief as claimed.

Conclusion

As with the previous articles, this digest of cases from the TAC shows that there is a significant body of tax law now available on the TAC website www.taxappeals.ie Compared to previous appeals, this batch of determinations has generated more instances where the unsuccessful party has requested the TAC to state a case on appeal to the High Court.

Eoin O’Shea FCA BL AITI ADIT is a practising barrister

eoshea@lawlibrary.ie