This is the 6^th tax.point article summarising the published decisions of the Tax Appeals Commission (“TAC”) and deals with the first 22 decisions of TAC during 2019.

Judgment No 1/2019 – Income tax, spousal maintenance payments

The appellant separated from his wife and agreed to pay her EUR 1,500 per month, being EUR 900 for spousal and EUR 600 for child maintenance. Section 1025 TCA 1997 provides that spousal maintenance payments are deductible for income tax in the hands of the payer and the appellant so claimed the EUR 900 per month. Revenue denied 50% of the claim on the basis that the appellant retained a 50% interest in the family home and that, therefore, some of the monies paid by must have made their way towards mortgage payments (the wife was responsible for the mortgage payments). There being no legislative basis for Revenue’s contention, the full amount was allowable, and the appellant succeeded.

Judgment No 2/2019 – Artists Exemption

The appellant had written a non-fiction book seemingly covering historical aspects of life in Ireland based loosely on diaries and, in all the particular circumstances, the case failed to meet the statutory tests and the appeal failed.

Judgments Nos. 3, 4, 14 and 20 2019 – Tax repayment claim and the 4 Year Rule

In these cases, like the 14 cases decided before 2019, the taxpayers made a request for repayment of tax outside the 4-year limit set out at section 865 TCA 1997 and, in those circumstances, these appeals failed. In case No. 4, it was re-emphasised that an out-of-date claim for overpaid tax cannot be set off against current liabilities for underpaid tax.

Judgment No 5/2019 – Income tax – Understated sales

A driving instructor was assessed to income tax for the years 2009–12. Revenue estimated his income based on the odometer of the car. While the taxpayer had no records of income, the TAC accepted (and Revenue also agreed) that the odometer was not an accurate record of sales because of private use of the car by the appellant and other family members and the appellant having to drive long distances to and from lessons. On that basis, the TAC reduced the assessments by 45%.

Judgment Nos 6, 7 & 18 2019 – Vehicle Registration Tax

In these cases, the appellants queried the charge to VRT. In all cases, the appeals failed. In case No. 7, the vehicle was in bad repair when it was imported and the appellant spent EUR 8,000 repairing it, however the car was registered after the repair and the legislative scheme requires the market value to be ascertained on registration rather than on importation and Revenue’s valuation was upheld. In case no. 18, a car had been converted to a goods vehicle and the appellant claimed the benefit of a lower tax rate after conversion but, as the law required the vehicle to have been a 2-seater at all stages of manufacture, the appeal fell on stony ground.

Judgment No 8/2019 – Corporation Tax

The appellant, an international derivatives trading firm with 1,850 employees worldwide, sought a tax deduction (section 81 TCA 1997) for foreign dividend withholding tax incurred and which was not separately relievable under double tax rules. A similar case had been decided (No 2/2018) in Revenue’s favour but as that case involved withholding tax on royalties, the appellant argued the position was different where DWT arose on stock used by the brokerage to hedge its positions in the course of trade. The TAC held in the appellant’s favour, placing emphasis on how the income and costs were accounted for in the books of the appellant and the expectation that the tax treatment would follow the accounting treatment. This case is on its way to the High Court for further argument.

Judgment No. 9/2019 – Local Property Tax

The appellant, a provider of student accommodation, claimed that the said residential units do not constitute a “dwelling” and are, therefore, not amenable to a charge to local property tax. The Commissioner spent a full day visiting the property and, in all the circumstances, determined that Revenue had correctly assessed the student accommodation to local property tax. The judgment in the case provides a useful overview on the interpretation of tax statutes generally.

Judgments Nos. 10 and 19 2019 – Vehicle Registration Tax – transfer of residence

A UK based taxpayer, a teacher, relocated to Ireland in September 2017. She bought a Mercedes sports car in March 2017 and, on moving to Ireland, claimed relocation relief for VRT purposes on the basis of 6-month ownership. Revenue denied the claim because she had taken a long holiday in July/August 2017 and could not, therefore, demonstrate 6 months continuous use of the car. The teacher’s answer was that she normally takes long holidays during that time, there being no children to teach, and that the legislature could hardly have meant to link length of car ownership to holidays taken. The TAC held with the teacher. In case no 19, the person transferring residence bought the car in July and moved to Ireland in September 2017, thus not meeting the 6-month ownership requirement, and was so refused the relief.

Judgment No 11/2019 – Vehicle Registration Tax

A disabled driver was denied an additional VRT benefit available where specific adaptions are made to a vehicle. He claimed reliance on a letter from Revenue which had the potential to (but did not actually) give the appellant comfort that the relief would be granted after the expenditure was made. The TAC found that it does not have jurisdiction to consider promises which might give rise to a legitimate expectation/estoppel for the benefit of the taxpayer and that such claims must be made, instead, in Court. Having considered the work done on the vehicle by the appellant, the TAC did not consider same “extensive” enough for the appellant to qualify for the additional exemption.

Judgment No 12/2019 – VAT and the four year rule

The appellant claimed, in 2012, the benefit of VAT paid in respect of an investment property in 2007. The invoices for the 2007 work were not provided to the appellant until 2011 whereupon the claim was turned down because of the four-year rule and the invoices being non-compliant. The appellant, in 2011, declined to appeal. But, in 2012, he made a new repayment claim and, this time, appealed it to TAC. The TAC found that the furnishing by the seller of new, correct, VAT invoices in 2011 brought the four year rule forward to 2011 and that the case fell to be determined with 2011, rather than 2007, as the baseline for the four year rule. The taxpayer’s downfall was that he didn’t appeal based on the 2011 refusal. Interestingly, Revenue allowed the taxpayer’s mother the benefit of a similar 2011 claim in the course of a separate tax appeal by his mother but his reliance on his mother’s settlement as a “precedent” failed because Revenue’s settlement with his mother was made on a without prejudice basis and, in any case, such a claim amounted to one of legitimate expectation and the TAC does not have jurisdiction to consider such arguments which are, instead, matters for the Courts.

Judgment No 13/2019 – Income tax director’s remuneration

Revenue assessed the appellant company director to income tax deducted by an employer and not remitted to the collector general under section 997A TCA 1997. In line with several decisions on the point, the appellant was unsuccessful in the many arguments advanced.

Judgment No 15/2019 – VAT transfer of business

The appellant took over a hotel business together with stock from a related company. Transfer of business relief was not claimed, instead input VAT was claimed by the appellant company. The VAT input credit was denied by Revenue on the basis that the original supply was exempt (i.e. no supply took place in law) because the VAT transfer of business provisions applied. The appellant claimed it could not have continued the business because it didn’t have a publican’s license – a claim countered by the fact that a Revenue official purchased a beverage from a bartender there on the day after the business transfer. The TAC held with Revenue.

Judgment No 16/2019 – Dividend Withholding Tax – Four Year Rule

Revenue assessed the appellant company to dividend withholding tax. The appellant argued that the dividends were paid from exempt patent income and that DWT didn’t so apply. An issue in the appeal was whether the assessments were issued out of time i.e. beyond the four years set forth at section 955(2) TCA 1997 and the parties argued before the TAC whether the four-year issue should be heard by the TAC first or at the same time as the substantive appeal. The appellant asserted that it would be convenient (because of the saving of time and costs) for the preliminary issue to be dealt with on a stand alone basis because, if the TAC held that the original returns constituted full and true returns, the whole appeal would be determined without the parties having to consider the patent income matters i.e. the substantive matters. After considering all of the matters which would lead the TAC to consider a four-year rule argument on its own, the TAC concluded that the appellant had not made a full return of all matters necessary to trigger the protection of section 955 (2) and that the case would proceed to trial on all of the issues. An interim decision such as this, which does not finally determine an appeal, is not appealable to the High Court.

Judgment No 17/2019 Corporation Tax – Group Relief

A number of Irish companies had surrendered losses between them. Each company was 100% owned by a Delaware LLC and the central issue in the case was whether the LLC qualified as a company under Irish law such as to make the Irish companies lawfully part of a group for tax purposes. After hearing expert evidence from three US tax experts including a former deputy assistant secretary for international tax affairs at the US Treasury, and considering the legal nature of an LLC as a separate legal entity from its members with perpetual existence, the TAC ruled in favour of the appellants. The TAC also found the LLC to be tax resident in the US for DTA purposes. Double tax agreement case law discussed included that of Memec, Anson, FCE Bank, Dreyfus and TD Securities and the TAC judgment, including its use of OECD commentary and the Vienna Convention where appropriate, is an excellent and thorough overview of the law on the interpretation of DTAs in Ireland. Given the complexity of the issues arising, it is hardly a surprise that the case is headed for further argument before the High Court.

Judgment No 21/2019 – Help to buy scheme

The appellant signed a contract on 15 July 2016 to buy an apartment. Unfortunately, the help to buy scheme (which provides for a repayment of income tax to buy a property) came into being for contracts concluded on/after 19 July 2016. The appellant’s claim to the benefit of the scheme failed because it fell outside the required statutory scope.

Judgment No. 22/2019 – Income tax and VAT – settlement

In this case, Revenue and the appellant came to an agreement requiring the variation of the assessments. The TAC duly ruled on the assessments and reduced/increased the various assessments in the way agreed between the parties.

Conclusion

As with the previous five articles, this digest of cases from the TAC shows that there is a significant body of tax law available on the TAC website www.taxappeals.ie.

Eoin O’Shea FCA BL AITI ADIT is a practising barrister specialising in tax and commercial cases.

eoshea@lawlibrary.ie