Revenue concerned alleged scheme could result in €110m tax losses, court told

The Revenue Commissioners is concerned a scheme allegedly involving 26 wealthy individuals here was a tax avoidance scheme that could result in up to €110m tax losses to Revenue, according to documents before the Commercial Court.

Various communications to officials during 2010 and into 2011 had stated the scheme involved using artificial capital losses to shelter capital gains, with a consequent benefit to the individual and loss to the Revenue.

Michael Collins, counsel for four businessmen challenging the issuing of formal Revenue opinions their claims for substantial capital gains losses should be disallowed, yesterday argued that Revenue is required to issue formal notices once it decides a tax advantage is gained from a transaction.

Such notices under the “draconian” Section 811 provision of the Tax Acts must be issued “immediately” the view is taken the transaction involves a tax advantage but that did not occur in these cases, he said.

The Revenue, he argued, had decided at the highest level sometime in 2010, or Jan 2011 at the latest, that these transactions were for a tax advantage but failed to issue the relevant notices to the four until July and August of 2011.

Breda Ruddle, a Revenue officer, told Mr Justice Brian McGovern in evidence that the Revenue did not really understand the computations of them as they “made no commercial sense”.

She said people from the National Treasury Management Agency, the Smurfit Business School, plus Irish and international experts, were asked to look into the transactions, and their final report was received by the Revenue in Jan 2011.

Ronan McNamee, of Temple Rd, Dartry, Co Dublin, brought his case arising from two financial transactions entered into by him and his wife about Sep 2009. They involved financial “straddles”, and a Revenue officer issued an opinion notice of Aug 2011 they were tax avoidance transactions under Section 811 with the effect tax advantage would be withdrawn.

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2011 that straddle transactions were tax avoidance transactions with the effect a substantial tax advantage should be withdrawn.

John Punch, The Park, Cobh, Co Cork, also disputed a notice that a tax advantage of €2.2m should be withdrawn over straddle transactions. Martin Punch, The Fountain, Glanmire, Co Cork, has challenged an opinion a tax advantage of €3.7m be disallowed.