Aisling Curran, Tax Director, Forvis Mazars: Some noteworthy Tax Appeal Commissioners include:
Corporation Tax: Tax Determination 165TACD2024: In this appeal, the TAC were asked to consider the refusal of a corporation tax refund by the Revenue Commissions (Respondent).
Aisling Curran
The Appellant operated a business initially as a sole trader and then as a limited company. She commenced voluntary strike off of the company and Revenue raise a query in relation to the relevant period and a corporation tax return was requested.
In March 2024, the Appellant filed her outstanding corporation tax return for the relevant period which resulted in an overpayment of corporation tax in the sum of €4,547. On 22 March, Revenue advised that they were precluded from making a repayment of corporation tax for the relevant period, as the claim was not made within the relevant 4-year period as set out in legislation, which was on or before 31 July 2021. The Appellant did not file the corporation tax return until 15 March 2024.
Section 865(4) TCA 1997 provides that “... a claim for repayment of tax under the Acts for any chargeable period shall not be allowed unless it made… within 4 years after the end of the chargeable period to which the claim relates.”
The Commissioner determined that the claim falls outside of the 4-year time limit prescribed in section 865(4) 1997.
While the monetary amount was small in this case, this case serves us as a reminder of the 4-year time limit and that the Commissioner has no discretion to assist in these circumstances.
Income Tax: Determination 148TACD2024: In these joint appeals, the TAC considered whether payments made to a UK-based entrepreneur and sole director/ shareholder (first Appellant) of an Irish company (second Appellant) constituted a director’s loan, or whether they constituted disguised salary payments.
During 2021, the taxpayer withdrew payments from the second Appellant’s bank account. While no loan agreements were entered into, the second Appellant recorded these payments as a director’s loan in their financial statements. Benefit-in -kind (BIK) at the rate of 13.5% was applied and paid over to Revenue, akin to preferential loans. Dividends were used to repay the loan.
In February 2023 Revenue raised an income tax assessment against the taxpayer and a PREM assessment against the company, recategorising these payments as disguised salary payments.
In arriving in favour of the Appellants, the Commissioner determined the following:
(i) The payments were loans and in line with the treatment adopted in the financial statements and supporting accounting records.
(ii) In applying the five-step test from The Revenue Commissioners v Karshan Midlands Ltd T/A Domino’s Pizza case, he rejected Revenue’s claim that the first Appellant was an “employee director”.
(iii) A tax charge under s122 TCA 1997 (BIK) was triggered due the preferential nature of the loan which the first Appellant had already accounted for and paid the tax.
(iv) He dismissed Revenue’s argument that the provision of the loan, if it had occurred, would have been in breach of the Companies Act 2014 (the loans exceeded 75% of the second Appellant’s assets and no summary approval procedure was put in place). The Commissioner was satisfied that the “first Appellant incurred a debt to the second Appellant irrespective of the status of the debt under company law.”
This case serves as a reminder of the importance of having specific loan documentation which sets whether the provision of monies was for a specific term or repayable on demand, or whether there were any other terms and conditions applying, together with the appropriate accounting treatment being adopted in the financial statements and supporting accounting records.
Peter Reilly, Tax Policy Leader, PwC Ireland: Two noteworthy TAC Determinations have emerged in recent months in relation to the application of the Capital Gains Tax (CGT) provisions to asset disposals. The first addresses the application of minority discounts in CGT valuations, whilst the second considers the necessity to apportion sales consideration between separate assets in a property transaction.
Peter Reilly
: The Appellant disposed of their entire shareholding in a company through multiple deeds of gift on the same date, applying a minority discount to each disposal. Revenue, however, assessed the CGT as if the shares were disposed of in a single transaction, resulting in a significantly higher tax liability. The crux of the case was whether these separate disposals should be aggregated for valuation purposes. The case law cited by Revenue in support of this position concerned estate duty and inheritance tax. The Appeal Commissioner ruled in favour of the Appellant, emphasising that each disposal must be considered separately, as supported by the statutory provisions and relevant case law. This decision highlights the limitations of applying principles from other tax domains, such as inheritance tax, to CGT cases.
30TACD2025 – CGT – Apportionment of Consideration - 3 March 2025
The Appellant was a member of a partnership that disposed of a property comprising land, buildings and integrated plant and machinery. It was treated as the disposal of a single asset for CGT purposes. Revenue, however, contended that the disposal comprised two distinct elements for tax purposes, plant and machinery which attracted capital allowances and land and buildings which did not, necessitating separate computations.
The apportionment of the sales proceeds and qualifying costs resulted in a gain on the sale of the land and buildings and a loss on the sale of the plant and machinery. Revenue contended that this loss was restricted and could not reduce the capital gain arising on the land and buildings, resulting in a substantially larger chargeable gain. The Appeal Commissioner ruled in favour of the Appellant, finding that there was no express statutory provision which enabled Revenue to adopt the approach of apportioning the sale consideration into two tranches for separate CGT computations.
This article appeared in the March 2025 edition of the Irish Tax Monitor.
