Revenue decisions challenged in court

A number of business people and company directors have challenged decisions by the Revenue Commissioners disallowing them up to €6.2m on grounds that transactions they engaged in allegedly amounted to tax avoidance measures.

Mr Justice Brian McGovern is hearing one of four cases brought in the Commercial Court to determine key legal issues relating to disputed transactions involving 26 high net worth individuals.

The applicants claim the disputed decisions arose from pre-determined views within Revenue that several people were engaged in tax avoidance via arrangements to create and use contrived capital losses. Revenue took the view that one scheme was used to generate artificial capital losses of €409m to shelter capital gains tax of over €85m.

The applicants are challenging the manner in which a Revenue officer opined in 2011 that their transactions were tax avoidance transactions under Section 811 of the Taxes Consolidation Act, with the effect that tax advantage is withdrawn and claims for capital gains losses disallowed.

They allege Revenue grouped together about 26 cases in which identical or similar arrangements were concluded via a London- based global assets management firm and referred to those as the “Schroders Ready-Made 26”.

It is alleged the transactions which the Revenue sought to impugn fell within the Schroders Ready-Made 26.

Yesterday, Michael Collins SC, for Ronan McNamee, argued the notices of opinion issued by a Revenue officer in 2011 were issued some time after a Section 811 opinion was reached at the highest level in Revenue about the Schroders Ready-Made 26.

It is claimed Martin O’Grady, a Revenue-nominated officer, prejudged the applicants’ position in circumstances including having allegedly received, or sent, emails containing reference to anti- avoidance activity of the Revenue in 2009. He was also aware in 2010 of the group, it is alleged.

The challenge by Mr McNamee, of Temple Rd, Dartry, Co Dublin, arises from two financial transactions entered into by him and his wife in 2007. They involved “straddles”, one involving government gilts and the other foreign currency.

Mr McNamee claims he and his wife made a profit from the gilts sale, which was exempt from tax, and a loss on the foreign currency transaction he deducted when compiling chargeable gains for his 2007 tax return.

In Aug 2011, a Revenue officer issued a notice the transaction was a tax avoidance transaction and directed a total tax advantage, including a surcharge, of €6.2m, was to be withdrawn from Mr McNamee. It is claimed a notice of such opinion must be given “immediately” to anyone from whom a tax advantage would be withdrawn if the opinion became final and conclusive but that was not done in this and other cases.

Derek Whelan of Foxrock Manor, Foxrock, Dublin, brought a similar challenge to a Revenue officer’s notice of Aug 2011 that straddle transactions were tax avoidance transactions with the effect a substantial tax advantage should be withdrawn.

John Punch, The Park, Cobh, Co Cork, also disputed a notice a tax advantage of €2.2m should be withdrawn over straddle transactions of 2009. Martin Punch, The Fountain, Glanmire, Co Cork, challenged a similar opinion a tax advantage of about €3.7m be disallowed arising from a straddle transaction of 2009.