An early retiree and company owner has won a €300,000 income tax battle with the Revenue Commissioners concerning a €750,000 sale of zoned land at the edge of a village.
This follows the Tax Appeals Commission (TAC) upholding the man's income tax appeal against the €299,587 assessment the Revenue Commissioners served on him in 2017 arising from the sale.
The dispute between the man and Revenue concerned the valuation of a 5.38 acre site at the edge of a village that the man’s own company purchased from him for €750,000 in 2017.
Revenue contended that the site should have had a market value at €200,000 and treated the €550,000 excess on the market value as a distribution by the company to the man, resulting in the €299,587 income tax assessment.
The sale arose after the man, following the receipt of financial advice, retired early in 2017 from his unnamed employer and set up the company to generate an income.
In October 2017, the man and his wife sold the land at issue to the new company for €750,000 and the disposal was included in the man’s 2017 tax return as a Capital Gains Tax (CGT) disposal.
The appellant told the hearing that in or around 2008, he was offered €850,000 from a developer for the purchase of the land at issue, but he refused the offer.
He said that it was always his intention to develop the site.
The 2017 payment of €750,000 was by way of a director’s loan and was to be paid in instalments, with €500,000 paid out until 2021 when the payments were suspended.
Counsel for Revenue told the hearing that the company payments made to the man from the sale were tax free.
Prior to the sale of the land at issue to the company, in September 2017 the appellant obtained a valuation of the land in the region of between €650,000 and €910,000.
The couple purchased the land at auction in 2005 for €750,000.
The appeal hearing into the case took place over three days at the TAC earlier this year where eight witnesses appeared on behalf of the appellant and two on behalf of Revenue.
In her findings at the end of a 61 page report, Commissioner Claire Millrine determined that the appellant had succeeded in his appeal, showing that the €299,587 tax is not payable.
This followed Ms Millrine concluding that the market value of the land in 2017 was €600,000 and not the €200,000 value advanced by Revenue. Ms Millrine found that the land "had development potential".
Ms Millrine has determined that the appellant pay income tax on the €150,000 difference between the €600,000 market value and the €750,000.
Ms Millrine doesn’t state what the appellant’s liability would be from the €150,000 excess but based on the €299,587 initial assessment the appellant’s income tax bill would be around €81,000.
