O'Brien v O'Brien
| Jurisdiction | Ireland |
| Judge | Ms. Justice Pilkington |
| Judgment Date | 18 December 2018 |
| Neutral Citation | [2018] IEHC 749 |
| Docket Number | [2017 No. 360 M.C.A.] |
| Court | High Court |
| Date | 18 December 2018 |
IN THE MATTER OF PART 47 OF THE TAXES CONSOLIDATION ACT, 1997 AS AMENDED BY THE FINANCE (NO 2) ACT, 2008
[2018] IEHC 749
[2017 No. 360 M.C.A.]
THE HIGH COURT
Deliberate default – Value added tax – Income tax – Applicant seeking a determination that the respondent is liable to penalties – Whether the respondent was in deliberate default
Facts: The applicant, Mr F O'Brien, applied to the High Court seeking the following reliefs: (1) a determination pursuant to s. 1077B (3) of the Taxes Consolidation Act 1997 that the respondent, Mr K O’Brien, is liable to penalties in the total amount of €108,423.77 pursuant to s. 1077E of the 1997 Act, s. 27 of the Value Added Tax Act 1972, s. 27A of the 1972 Act and s. 116 of the Value Added Tax Consolidation Act 2010; (2) such further or other order pursuant to s. 1077C of the 1997 Act regarding the recovery of the penalty of the subject matter of the application; and (3) the standard reliefs of further or other order and costs. The applicant contended that the respondent failed to file VAT returns between 1st January, 2008, and 31st December, 2013 and failed to file income tax returns between 1st January, 2009 and 31st December, 2013.
Held by Pilkington J that the respondent was in deliberate default and liable for 100% of the penalty imposed.
Pilkington J held that she would make the following order in the terms sought being; a determination pursuant to s. 1077B (3) of the 1997 Act that the respondent is liable to penalties in the total amount of €108,423.77 pursuant to s.1077E of the 1997 Act, s. 27 of the 1972 Act, s. 27A of the 1972 Act and s. 116 of the 2010 Act. Pilkington J would hear the parties as to any further orders sought.
Relief granted.
By originating notice of motion, the applicant seeks the following reliefs:
1. A determination pursuant to s.1077B (3) of the Taxes Consolidation Act 1997 as inserted by the Finance (No. 2) Act 2008 that the respondent herein is liable to penalties in the total amount of €108,423.77 pursuant to s.1077E of the Taxes Consolidation Act 1997, s.27 of the Value Added Tax Act 1972, s.27A of the Value Added Tax Act 1972 and s.116 of the Value Added Tax Consolidation Act 2010.
2. Such further or other order pursuant to s.1077C of the Taxes Consolidation Act, 1997 as inserted by the Finance (No. 2) Act 2008 regarding the recovery of the penalty of the subject matter of this application.
3. The standard reliefs of further or other order and costs.
4. In reality the reliefs are focussed on (1) above.
5. The originating notice of motion issued on 29th November, 2017, the applicant's grounding affidavit sworn on the 21st November, 2017, replying affidavit of the respondent sworn on 6th March 2018, the supplemental affidavit of the applicant sworn on 4th April 2018 and finally the second replying affidavit of the respondent sworn on 16th May 2018.
The respondent's VAT liabilities have been quantified at €60,638 with a further fixed penalty of €125 for negligently failing to file VAT returns.
The income tax liabilities have been quantified for the period at €47,660.77 bringing a total penalty amount to €108,423.77.
The applicant contends that this respondent has failed to file VAT returns between 1st January, 2008, and 31st December, 2013 and failed to file income tax returns between 1st January, 2009 and 31st December, 2013.
On the 28th April, 2015 the respondent was compulsorily registered for VAT with affect from 1st January, 2008.
In May 2015 assessments to income tax were raised the years ending 31st December, 2009, 2010, 2011, 2012 and 31st December 2013. No valid appeal was ever lodged to these assessments and accordingly those assessments are now final.
In September 2015 assessments to VAT were raised for the taxable period ending 31st December, 2008, 2009, 2010, 2011, 2012, 2013 and 2014. These assessments have not been appealed and accordingly are also now final.
A notice of an opinion issued to the respondent on the 18th November, 2016; it is not relied upon as an amended notice of opinion issued on the 16th June, 2007.
Section 1077B (3) of the Taxes Consolidation Act 1997 states as follows:
‘Where a person to whom a notice issued under subs. ( 1) or (2) does not, within 30 days after the date of such notice:- …
then a Revenue officer may make an application to a relevant court for that court to determine whether-
(i) any action, inaction, omission or failure of, or
(ii) any claim, submission or delivery by,
the person in respect of whom the Revenue officer made the application gives rise to a liability to a penalty under the Acts on that person.’
The imposition of penalties is dealt with in s.1077E and is headed ‘Penalty for deliberately or carelessly making incorrect returns, etc.’ in respect of income tax, corporation tax and capital gains tax. Subsection (3) states as follows:
‘Where any person deliberately fails to comply with a requirement to deliver a return or statement of a kind mentioned in any of the provisions specified in column 1 of Schedule 29, that person shall be liable to a penalty.’
The penalty provision in s.1077E (4) is as follows in respect of subs.(3) above it is:
‘…the amount specified in subsection (12),
reduced, where the person liable to the penalty cooperated fully with any investigation or inquiry started by the Revenue Commissioners or by a Revenue officer into any matter occasioning a liability to tax of that person, to—
(i) 75 per cent of that amount where subparagraph (ii) or (iii) does not apply,
(ii) 50 per cent of that amount where a prompted qualifying disclosure is made by that person, or
(iii) 10 per cent of that amount where an unprompted qualifying disclosure is made by that person.’
Subsection (5) deals with where a person ‘carelessly but not deliberately’ delivers an incorrect return or statement of any kind and subs. (6) deals with the situation where a person ‘carelessly but not deliberately’ fails to comply with the requirement to deliver a return or statement of any kind.
Subsection (7) states as follows:
1‘(a) The penalty referred to-
(i) In subsection (5) shall be the amount specified in subsection (11), and
(ii) In subsection (6) shall be the amount specified in subsection (12),
reduced to 40% in cases where the excess referred to in subparagraph (I) of paragraph (b) applies and to 20% in other cases.
(b) Where a person liable to a penalty co-operated fully with any investigation…’
Subsection (12) states as follows:
‘The amount referred to in (b) of subsection (4) and in paragraph (b)(ii) of subsection (7) shall be the difference between-
a) the amount of tax paid by that person for the relevant period before the start of the Revenue Commissioners or by any Revenue officer of any inquiry or investigation where the Revenue Commissioners had announced publicly that they had started an inquiry or investigation or where the Revenue Commissioners have, or Revenue officer has, carried out an inquiry or investigation into any matter that would have been included in the return or statement if the return or statement had been delivered by that person and the return or statement had been correct, and
b) the amount of tax which would have been payable for the relevant periods if the return or statement had been delivered by that person and the return or statement had been correct.’
It is clear that the categories of person to whom a penalty might be imposed are differentiated- subs. (3), speaks of a person who ‘deliberately’ fails to comply, subs. (5) deals with a person ‘carelessly, but not deliberately’ and that is referable also to subs. (6) and then to subs. (7)(b) dealing with a person who has ‘co-operated fully’. Subsection (4) also sets out differing percentages for the imposition of a penalty and this is set out below.
It therefore follows that the penalty imposed by this legislation varies and is dependant upon the categorisations above.
The applicant contends that this is a case where the ‘deliberately’ criteria applies. If that is accepted then, within that category, the penalty can be reduced ‘where the person liable has co-operated fully with any investigation or inquiry started by the Revenue Commissioners or by a Revenue officer into any matter occasioning a liability to tax of that person and is referable as set out above, to either 75% with regard to full co-operation of any investigation or inquiry started by the Revenue Commissioners, 50% in the case of a ‘prompted qualifying disclosure’ and 10% in the case of an ‘unprompted qualifying disclosure.’
‘Qualifying disclosure’ is defined as:
‘A disclosure that the Revenue Commissioners are satisfied is a disclosure with complete information in relation, with full particulars of, all matters occasioning a liability to tax that gives rise to a penalty referred to in subs. (4).’
‘Prompted qualifying disclosure’ is defined as
‘a qualifying disclosure that has been made to the Revenue Commissioners or to a Revenue official in the period between:
(a) The date on which the person is notified by a Revenue Officer on the date which an investigation or inquiry into any matter concerning a liability to tax of that person will start,
(b) the date that the investigation or inquiry starts.’
‘Unprompted qualifying disclosure’ is defined as where a ‘qualifying disclosure that the Revenue Commissioners are satisfied has been voluntarily furnished to them…’ (essentially prior to any investigation or inquiry started by them where upon notification of such an inquiry, the disclosure is made prior to that time.)
Finally, ‘carelessly’ is defined as by a ‘failure to take reasonable care’.
In respect of the...
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