J.S v A Tax Appeal Commissioner

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr. Justice Alexander Owens
• Judgment Date: 30 July 2024
• Neutral Citation: [2024] IEHC 565
• Docket Number: [2023 No. 179 JR]

Between:

J. S. S., J. S. J., T. S., D. S. and P. S.

Applicants

and

A Tax Appeal Commissioner

Respondent

Criminal Assets Bureau

Notice Party

[2024] IEHC 565

[2023 No. 179 JR]

AN ARD-CHÚIRT

THE HIGH COURT

Judicial Review - Tax Appeal Commissioner - Tax assessment

Facts: This Judicial Review challenged the validity of a step taken by an Appeal Commissioner in order to comply with guidance from the Court of Appeal in JSS and others v Tax Appeal Commissison [2020] IECA 73. The applicants grounds to challenge the descision on the validity of the income tax assessment which related to a matter which the Appeals Commissioners have jurisdiction to decide on in the course of hearing tax appeal.Court found that the onus is on the party appealling or challenging a tax assessment, and dismissed the Judicial Review

Appeal dismissed

JUDGMENT of The Hon. Mr. Justice Alexander Owens delivered on the 30th day of July 2024

1 This application for judicial review challenges the validity of a step taken by an Appeal Commissioner in an effort to comply with guidance from the Court of Appeal in JSS and others v. Tax Appeal Commission [2020] IECA 73. She decided that the applicants must establish in evidence that they were not “chargeable persons” to enable her to determine whether their appeals against tax assessments are admissible.

2 In March 2016, a Criminal Assets Bureau Revenue officer issued income tax assessments against each of the applicants in respect of tax years between 2008 and 2014. These assessments estimated income tax due under Schedule D. Some of these assessments were revisions of assessments which related to tax returns which the applicants had made in respect of those tax years. All were based on a view that the applicants had failed to comply with self-assessment requirements relating to Schedule D income.

3 The applicants claim that they were not tax-resident in the State between 2008 and 2014. They say that they were working abroad as nomadic tarmac contractors and that any income earned by them from trade within the State during that period was not taxable in their hands because they had no agent within the State during that period. They say that because they were not tax-resident in Ireland, they are not chargeable for tax on profits earned from trading abroad during those years.

4 They assert that the issue of whether they were chargeable persons by reference to whether or not they were tax-resident “goes to jurisdiction.” They assert that Revenue authorities are obliged to prove to the Appeals Commissioners that they were resident in the State during the relevant tax years “to show that they have jurisdiction to raise an assessment on that person” before the Appeals Commissioners can decide whether or not to assume jurisdiction to deal with their appeals.

5 If this contention is correct, it will follow that when any person who has been assessed for income tax asserts in an appeal from that assessment that he or she was not a “chargeable person” during the tax year covered by that assessment, the Revenue authorities must, as a preliminary step in that appeal process, prove that the person concerned was a “chargeable person.”

6 Appellants against income tax assessments might make a case that they are not chargeable for tax because they did not engage in any trading activity during the tax years covered by assessments. If the applicants are correct, all of the points which they make in this litigation would also apply to that circumstance.

7 This would drive “ a coach and four” through the tax assessment and appeals provisions of the Taxes Consolidation Act 1997 (the TCA).

8 The applicants claim that the Appeal Commissioners do not have power to require them to establish by evidence their non-resident tax status during the years covered by these tax assessments.

9 This application for judicial review is misconceived. The jurisdiction of the Appeals Commissioners to hear and determine income tax appeals proceeds on a statutory assumption that the tax assessment being appealed is valid as to amount of tax and the basis on which that tax is payable in all respects and that the tax so assessed is due.

10 An appellant bears the onus of displacing that assessment and of proving facts necessary to support any contention that tax assessed is either not due or that less tax is due. Proof that a person was not tax-resident is not required as a condition precedent to hearing of a tax appeal. Any issue of whether or not a person was tax-resident does not “go to jurisdiction” and must be decided on evidence given in the course of the appeal hearing.

11 Assuming that an Appeals Commissioner has power to engage in a preliminary evidential hearing relating to whether to accept a tax appeal, the same rule relating to proof must apply to that proceeding.

12 The legislative evolution of the assessment and appeals system for income tax and corporation tax is relevant to correct understanding of the intention and effect of currently applicable provisions of the TCA. The Oireachtas has built on a well-understood legislative framework which has developed over decades and has much in common with the UK system.

13 The TCA provides an appeals procedure which enables any person who has received an income tax assessment to challenge that assessment and prove it to be incorrect. Issues relating to whether or not a person assessed for income tax was tax resident are dealt with in the same way as any other issue which may arise during a tax appeal.

14 Paras. [22] to [34] of the judgment of Murray J. in ( [2022] 1 I.R. 388 Lee v. The Revenue Commissioners [2021] IECA 18) provide a lucid explanation of the tax assessment and appeals system.

15 That judgment was given by reference to the content of ss.933 and 934 of the TCA. Murray J. explained the core features of these sections. These features are retained within the provisions of Part 40A of the TCA which introduced revised tax appeals procedures.

16 Prior to 1988, tax inspectors issued assessments of income tax. Generally, these were based on information provided by taxpayers. If a person omitted to provide information or provided information that was perceived to be incorrect, tax inspectors were empowered to issue estimated tax assessments in exercise of judgment of what ought to be charged, based on such information as was available to the inspector: see now ss.918 and 922 of the TCA.

17 Income tax self-assessment provisions were first introduced by Chapter II of the Finance Act (FA) 1988. The Oireachtas defined those who were obliged to adhere to new statutory obligations to file and pay.

18 These obligations were applied to “chargeable persons.” “Chargeable person” means “as respects a chargeable period, a person who is chargeable to tax for that period, whether on his own account or on account of some other person…”: see s.9(1) of the FA 1988; ss.950 and 959A of the TCA. The statutory provisions use the term “chargeable person” in this context. That term “as respects income tax, does not include a person to whom subsection (1) of section 959B relates.”

19 This definition goes on to exclude persons whose income in a year consists either solely of emoluments or of emoluments together with income of less than the specified amount from other sources or persons exempted from the requirements of Chapter 3 or whose sole chargeable income derives from annuities within ss 237, 238 or 239 of the TCA: see s.959A and 959B of the TCA.

20 This did not alter the position prior which applied prior to 1988. Those who were not tax-resident were not chargeable for income tax on trading profits made outside Ireland: see ss. 52 and 53 of the Income Tax Act 1967 (the ITA). Those who did not engage in any trade had therefore had no trading income were not chargeable under Case 1 of Schedule D either.

21 This remains the position under the TCA: see now s.18(1) 1 (a)(i) and s.18(2) of the TCA.

22 Verification by proof to a statutory adjudicator that a person was “chargeable” to income tax on profits of trade is not and never was a statutory pre-condition to issue of a tax assessment.

23 Tax inspectors could lawfully issue estimated assessments on those who might claim not to be chargeable to income tax for such reasons or for any other reason. They were not bound to accept explanations for non-payment of tax or failure to make returns. A tax inspector might be unaware at time of making of a tax assessment that any such explanations would be advanced for non-payment of tax.

24 The jurisdiction of the Appeals Commissioners to take up and decide appeals from income tax assessments has never depended on it being established to them by Revenue authorities that a person was tax-resident or had taxable earnings. These issues must be raised and decided on in course of the tax appeal. The Appeals Commissioners have not been conferred with a general jurisdiction to investigate alleged invalidity of tax assessments appealed to them: see para. [22] of Lee at [2022] I.R. 398.

25 Provisions in the FA 1988 and the TCA were without prejudice (“…nothing shall prevent…”) to existing powers of a tax inspector to raise estimated assessments which now applied in case of default of delivery of a return under the self-assessment rules where that official is “not satisfied with the return which has been delivered, or has received any information as to its insufficiency”: see s.13(3)(b) of the FA 1988; s.954(3) of the TCA.

26 One of these powers was originally provided by s. 184 of the ITA. This was re-enacted in s.922 of the TCA which provides that: “[w]here-(a) a person makes default in the delivery of a statement in respect of any income tax under Schedule D or F, or (b) the inspector is not satisfied with a statement which has been delivered, or has received information as to its insufficiency, the...