The Tax Appeals Commission (TAC) has determined that a disputed income tax bill of €605,488 against a business couple from a €1.1 million share sale should stand.
The TAC has made the ruling after finding that there was no basis upon which to conclude that the €1.1 million disposal of the wife's shares to a company owned by her husband "was for a bona fide commercial reason".
The appellant in the case, the wife, has already paid Capital Gains Tax of €362,543 in relation to the €1.1 million she received for her shares.
The couple - assessed jointly - must now pay €242,945 in income tax owed to Revenue as part of the overall €605,488 assessment.
Appeals Commissioner, Conor O’Higgins, deemed the €1.1 million to be a distribution from the company chargeable to income tax.
In his findings, Mr O’Higgins relied on Section 817(4) of the Tax Consolidation Act 1997.
This is a Revenue anti-avoidance provision that seeks to counteract a "scheme or arrangement" involving a close company, the purpose of which is to enable a shareholder to extract money from that company by means other than the payment of a dividend or distribution and the consequent payment of income tax.
Before the TAC, counsel for Revenue submitted that it was clear on the facts that there was a scheme or arrangement put in place by the woman, the purpose of which was to avoid the payment of income tax on money that was extracted from the company.
Revenue argued that that €1.1m received should have been subject to the higher rate of income tax, rather than the 33% CGT that was paid.
The tax dispute arose from the woman selling 90 of 100 ordinary shares valued at €1.1 million in a company where her husband owned the remaining 10 shares.
The woman sold the shares for €1.1 million to a company where her husband was the sole shareholder.
The funds used for the purchase were provided by the company itself by way of loan.
Revenue issued the €605,488 assessment in 2018 from the 2014 share sale and this was appealed to the TAC.
At the TAC the woman did not appear to provide evidence.
However, she asserted in the Notice of Appeal that the share disposal was for bona fide commercial reasons.
She stated that the bona fide reason for the transaction was that she had borrowings with a third party that necessitated the raising of funds.
However, in his findings, Mr O’Higgins stated that whether the share sale was because she had debts that needed to be paid cannot be ascertained in the absence of evidence.
He said: "A bald statement in written argument does not constitute evidence."
As part of its argument before he TAC, Revenue submitted that having decided that the transaction at issue was in reality the payment of a dividend and not the disposal of shares, the burden rested on the Appellant to prove that the anti-avoidance measure set out in section 817 of the TCA 1997 did not apply.
Revenue submitted that the Appellant, having declined to give any evidence regarding the purpose of the transaction at issue, could not satisfy this burden resting with her.
