Shareholder loses €1.6m tax battle with Revenue

They claimed liability on €5.79m sale should be 'nil'

The Commissioner slightly reduced the Revenue assessment from €1.77m to €1.67m

A former company shareholder who claimed that she owed no Capital Gains Tax (CGT) on the sale of her €5.79m shareholding in a firm has lost a €1.6m tax battle with the Revenue Commissioners.

This follows the Tax Appeals Commission (TAC) finding that an initial Revenue CGT bill of €1.77m be reduced marginally to €1.67m and must be paid by the former shareholder arising from the €19.3m company sale.

The woman had inherited the shareholding on the death of her husband who served as Non-Executive Chairman at the firm and claimed that her CGT liability from the sale of her 30 per cent of the firm should be nil.

This was on the basis of the woman declaring proceeds on the sale of only 5 per cent of the shares of €966,460 with an arising chargeable gain of €900,000.

She also declared unused capital losses from prior periods of €1.02m with a resulting nil liability to CGT.

The remaining 25 per cent of the shares had been the subject of a share for share exchange, and therefore she did not consider that there was a liability to CGT in respect of their disposal.

However, in an assessment issued in December 2023, Revenue dis-applied the share for share exchange on the 25 per cent shareholding, and issued an amended assessment to CGT in the amount of €1.77m.

This was on the basis that the net chargeable gain arising on the sale of the Appellant’s shares in the company was adjusted to €5.36m.

In February 2024, the company shareholder appealed the Revenue assessment to the TAC.

At hearing, counsel for Revenue stated that the Appellant had originally claimed that she had carried out a bona fide commercial transaction by means of the share for share exchange with a Cypriot company.

Counsel stated that this claim was withdrawn on the eve of the hearing, so it had been accepted by the Appellant that the main purpose or one of the main purposes of the transaction was the avoidance of tax.

Counsel also stated that the Appellant had also claimed entrepreneurial relief, even though there was no evidence to support this claim and this too was dropped on the eve of the hearing.

At the start of the hearing, counsel for the Appellant confirmed that the only issues that the Appellant wished to proceed with were the correct valuation of the shares, and the claimed losses.

In his findings, Commissioner, Simon Noone found that the losses claimed by the appellant are disallowed.

After finding the initial valuation of the appellant’s 25 per cent shareholding was €380,000 at the date of valuation, Mr Noone slightly reduced the Revenue assessment from €1.77m to €1.67m.

The TAC has been requested to state a case for the opinion of the High Court in respect of its determination.