Supreme Court reserves judgment in tax relief case
The appeal by John O’Flynn and Michael O’Flynn, with addresses at Kilcrea, Ovens, Co Cork, and their company, O’Flynn Construction Co Ltd (OFC), involves the Supreme Court considering for the first time the meaning of section 811 of the Taxes Consolidation Act, the general anti-avoidance provision of that act.
The two-day appeal concluded yesterday before the five-judge court, presided over by Mr Justice Nial Fennelly, who said the court was reserving its decision.
The Revenue Commissioners claimed a scheme under which the brothers received payments of £298,000 each in 1992 was “far from being a normal use” of tax-free export sales relief (ESR) provisions but the Appeals Commissioners of the Revenue found the scheme was not a tax avoidance transaction.
The Revenue challenged that Appeals Commissioners finding and in 2006 the High Court ruled that the arrangement under which the brothers received £298,000 each in January 1992 in tax-free ESR dividends, funded by the write-off of a loan of £650,000 by their company OFC, was a misuse of the relevant reliefs and a tax avoidance transaction.
The High Court ruled the transaction involved ESR reserves in a company in the Dairygold group being transferred to OFC — a construction company not engaged in an export business — to allow tax relief dividends to be paid to shareholders of that company, the O’Flynns.
The High Court ruled the scheme was “completely at odds” with the purpose of the export sales relief.
The Appeals Commissioners decided the transaction was not a tax avoidance transaction on grounds it did not result in a misuse of the ESR provisions.
The issue before the Supreme Court is whether or not the transaction was a tax avoidance transaction under tax legislation.
CONNECT WITH US TODAY
Be the first to know the latest news and updates
