O’Brien battles €57m tax liability

Billionaire businessman Denis O’Brien is fighting a bid by Revenue to overturn a decision that he was not liable to pay nearly €57m in tax in Ireland around the same time he started living in Portugal.

A Revenue appeals commissioner decided Mr O’Brien’s permanent home in 2000/2001 was Quinta do Lago, Almanscil, Portugal, and not Ireland, which meant he was therefore not liable for capital gains tax of €56.8m on €285m he received for 5.7m shares he owned in Esat Digifone when it was sold to British Telecom in 2000.

The inspector of taxes was unhappy with that decision and the appeals commissioner agreed to refer the matter to the High Court to determine whether he was wrong in law.

Yesterday in the High Court, Ms Justice Mary Laffoy reserved her decision.

The court heard the case arose because of the purchase in 2000 by Mr O’Brien, of 6 Raglan Rd, Ballsbridge, one of a number of Dublin investment properties he had built up since the early 1990s. It is a seven-bedroom detached period house which he bought through a company he controlled, Partenay Ltd

The Revenue said that even though it accepted Mr O’Brien moved with his family to Portugal in Feb 2000, he also had a permanent home available to him at that time in Raglan Rd which was habitable.

In view of this, the Revenue said, the appeals commissioner should have gone on to decide whether his personal and economic interests were closer to Ireland than to Portugal, thereby making him tax liable him in accordance with the Ireland/Portugal double taxation convention

The court heard that Mr O’Brien employed a number of architectural and building experts to show it was not habitable at the time and needed extensive renovation which was not completed until 2002. A builder and an engineer said parts of the house were dangerous.

Mr O’Brien argued all the family’s personal possessions were relocated to Portugal after they left their home in Wellington Rd in Feb 2000, a property which was rented out and no longer available to the family.

The appeals commissioner, Ronan Kelly, found Mr O’Brien and his family did not reside there prior to the tax year 2000/01 and he had never put his mark or stamp on the property, including by keeping his personal and sentimental possessions there. It was not therefore his permanent home.

Anthony Collins, counsel for the inspector of taxes, said Mr O’Brien bought the house from Peter White, and his wife Laetitia, who received a number of calls from estate agents in 1999 asking if they were interested in selling as they had a client anxious to buy. Terms were eventually agreed between them and Mr O’Brien.

The sale closed in May 2000 and refurbishment works began in Jan 2001.

From Feb 2002, the O’Briens used it during the course of visits to Ireland until it was vacated by them in Mar 2003, the appeals commissioner was told.

In his evidence to the commissioner’s hearing in Jul 2003, Mr O’Brien said he bought the Raglan Rd house primarily as an investment but with the option to use it as a family home if the family decided to return to Ireland. Mrs O’Brien told the hearing her home was in Portugal, two of her children go to school there, and all her family items were there.

Mr Collins argued the appeals commissioner had used the wrong test under the double taxation convention in which he found Raglan Road was not the permanent home. The requirement was that a “permanent home [be] available” to a person, not that it be availed of, counsel said.

Dermot Gleeson, counsel for Mr O’Brien, said the commissioner had made a “perfectly sane, sensible, and rational determination” in accordance with legal precedent, domestically and internationally.