A property investor's firm has lost a €8.9m corporation tax battle with the Revenue Commissioners.
This follows the Tax Appeals Commission (TAC) upholding the €8.9m assessment against the property investor's company after a 12 day oral hearing into the company appeal at the Commission.
Along with the €8.9m tax bill, the investor will also be left with a hefty legal bill from the appeal after the 12 days of hearing in September 2022 where he had a legal team in place to advance his company’s case.
At the end of his 55-page ruling Commissioner, Simon Noone found that based on a review of the facts and a consideration of the submissions, he was satisfied that Revenue's amended assessment to corporation tax of €8.9m is correct.
Mr Noone said that "this is a particularly complex case, in both the factual circumstances involved and the legal principles applying".
The property investor’s appellant firm was a member of a group of companies and in the relevant period, the appellant firm sold a commercial property and the net proceeds from the sale totalled €9.48m.
For the year, the firm declared that it recorded a net loss of €51.97m and consequently it had zero corporation tax to pay.
However, in June 2018, Revenue issued its amended assessment of €8.9m corporation tax bill concerning the company recording capital gains of €72.15m for the year.
The assessment was appealed and at hearing the owner of the appellant firm stated that his business consisted of organising, arranging and structuring co ownership investments, predominantly in property.
The appellant appealed on a number of grounds concerning the treatment of a capital contribution and the sale of rights to dividends and as to whether a €3m fee paid by the appellant firm was allowable as an incidental cost of selling the property.
At hearing, Revenue successfully argued that €62m base cost of the acquisition of shares was not available to the Appellant firm to create a loss on a capital gain.
Concerning the €3m+VAT property sale fee, Revenue argued that it was not conceivable that a party would sell an asset and pay its agent far more than what it was going to obtain as net profit itself.
In his findings, Mr Noone disallowed the €3m +VAT fee as an allowable expenses by the appellant firm against its corporation taxes after finding that the work carried out by the party who invoiced the appellant the €3m+VAT was not wholly or exclusively for the purposes of selling the property.
The appellant firm had claimed a capital contribution of €27.39m as deductible expenditure for the purpose of reducing its tax bill.
However, Mr Noone found that the €27.39m capital contribution did not constitute enhancement expenditure.
Mr Noone confirmed that the TAC has been requested to state a case for the High Court to determine on the matters before the commission.
Reporting by Gordon Deegan
