Lee v Revenue Commisioners

• Jurisdiction: Ireland
• Judge: Mr Justice Keane
• Judgment Date: 31 January 2018
• Neutral Citation: [2018] IEHC 46
• Docket Number: [2015 No. 269R]
• Court: High Court
• Date: 31 January 2018

BETWEEN/

KENNY LEE

APPELLANT

AND

THE REVENUE COMMISIONE

RSRESPONDENT

[2018] IEHC 46

[2015 No. 269R]

THE HIGH COURT

REVENUE

Revenue - Ss. 943(1) and 941 of the Taxes Consolidation Act, 1997 - Stated Case for opinion of the High Court - Tax liability - Revenue auditors - Repayment of the amount - Appeal of Assessment to Appeal Commissioners

Facts: The present case was a stated case that came for the opinion of the High Court pursuant to ss. 943(1) and 941 of the Taxes Consolidation Act, ('TCA') 1997. The key issue arose as to the scope of the jurisdiction of the Appeal Commissioners and the Circuit Court on an appeal under s. 933 or s. 942 of the Taxes Consolidation Act, 1997. The Circuit Court had stated a question for the opinion of the High Court. The question was whether the Circuit Court, hearing an appeal from an Appeal Commissioner, possessed jurisdiction under s. 942(3) of the TCA to determine whether the parties to that appeal had entered into a settlement in respect of the liability at issue in that appeal. The appellant contended that his disclosure and payment of taxes under the voluntary disclosure scheme by the respondent amounted to a settlement as the respondent had encashed the cheque that the appellant presented to it in lieu of his tax liabilities. The respondent denied the existence of such a settlement.

Mr. Justice Keane remitted the matter to the Circuit Court to be reheard. The Court expressed no opinion on whether an accord or a settlement existed between the parties and left it on the Circuit Court to determine in accordance with the evidence placed before it. The Court held that the Judge of the Circuit Court, who was hearing an appeal from an Appeal Commissioner, did have the jurisdiction under s. 942(3) of the Taxes Consolidation Act to determine whether the parties to an appeal had entered into a prior settlement accord in relation to the liability. The Court, however, held that the Appeal Commissioner and the Circuit Court did not have the jurisdiction to entertain a claim of legitimate expectation or promissory estoppel to the same effect.

JUDGMENT of Mr Justice Keane delivered on the 31st January 2018

Introduction

1 His Honour Judge David Riordan, a judge of the Circuit Court, has stated a case for the opinion of the High Court pursuant to ss. 943(1) and 941 of the Taxes Consolidation Act 1997, as amended ("the TCA") at the request of Mr Kenny Lee ("the appellant"). The Office of the Revenue Commissioners is the respondent.

2 While the case stated poses three questions, it really turns on a single issue concerning the scope of the jurisdiction of the Appeal Commissioners and Circuit Court on an appeal under s. 933 or s. 942 of the TCA, respectively. The issue is whether the obligation on both the Appeal Commissioners and the Circuit Court under s. 934 of the TCA - to abate; reduce; permit to stand; or increase any assessment that is the subject of an appeal - requires where relevant, or precludes in all circumstances, consideration of whether a prior settlement has been reached between the taxpayer concerned and the Revenue Commissioners in respect of the relevant liability.

Background

3 In May 2008, the respondent announced a voluntary disclosure initiative for persons holding untaxed funds in domestic deposit accounts, as a preliminary to an inquiry that it was proposing to conduct into that issue.

4 To avail of the "qualifying disclosure" provisions of s. 1077(E) of the TCA in that regard, an eligible person had to submit a "notice of intention to make a qualifying disclosure" on or before 15 September 2008, followed by full payment and disclosure on or before 15 January 2009.

5 The appellant signed a Notice of Intention to make a Qualifying Disclosure of a Tax Default relating to Undisclosed Funds Invested with Financial Institutions, dated 11 September 2008. The evidence before the Circuit Court was that it was submitted to the respondent by the appellant's then accountants on 12 September 2008. It recites that it is a formal notification of the appellant's intention to make a qualifying disclosure of outstanding tax liabilities in accordance with the Code of Practice for Revenue Auditors 2002. It includes a formal undertaking by the appellant to submit computations and pay the tax, interest and penalty due by 15 January 2009. It identifies the particular financial institution in which the appellant's untaxed funds were deposited.

6 On 9 January 2009, the appellant's solicitor wrote on his behalf to the respondent, stating in material part:

"…[I]n order to bring this matter to a satisfactory conclusion, we are instructed to offer, on behalf of our client, the sum of €12,500.00 to include all taxes and duties up to and including the end of the financial year, 31/12/07. We will further arrange for our client to put in a Return for 2008.

You might please note that the enclosed cheque from this office is the maximum amount our client can raise at this juncture and leaves him in a very vulnerable financial position. It may be that our client does not owe this much tax or it may transpire that he owes somewhat more. The cheque is sent on that basis and if it is not accepted in that means you might please return the cheque to us. Our client recognises that this is not entirely satisfactory from a Revenue point of view but is the best he can do in the circumstances."

7 A cheque in the amount of €12,500, drawn on the solicitors' account, was included under cover of that letter.

8 The respondent wrote to the appellant's solicitors in response on 13 January 2009, stating:

"I refer to your submission, which was received in this office on 12/01/2009.

This letter should be regarded as a receipt for the payment of €12,500."

9 According to the uncontroverted evidence before the Circuit Court, the cheque was encashed by the respondent.

10 Over six months later, on 3 July 2009, the respondent wrote to the appellant's solicitors, referring to their "submissions dated 09/01/09" and a recent telephone call between them. The author identified himself as the officer of the respondent to whom the matter had been referred, before stating that the appellant's disclosure had been selected for examination in accordance with paragraph 10.2 of the Code of Practice for Revenue Auditors. Presumably, that was a reference to the Code of Practice for Revenue Auditors 2002, since replaced by the 2010 Code, which came into effect on 1 October 2010. The letter went on to request the provision of bank statements for the period concerned and the computations, if any, involved in the offer of €12,500 to discharge the relevant liability, before stating in conclusion:

"Your submissions and your client's Notice of Intention to make a Qualifying Disclosure have highlighted a potential liability and I am suggesting, in the circumstances, that the payment made of €12,500 be treated as a payment on account against any final liability to tax, interest and penalties."

11 The appellant's solicitors wrote in reply on 9 July 2009. In that letter, they stated that the payment they had made on behalf of the appellant was offered on the terms set out in their letter of 9 January 2009 and was accepted by the respondent as such. Thus, they asserted, the respondent was not entitled to re-open the matter, nor to treat that payment of €12,500 as one made on account instead.

12 The respondent replied by letter dated 13 July 2009, stating:

"The monies paid were not accepted in the terms offered.

As you are not happy that the payment of €12,500 be treated as a payment on account I am offering your client repayment of the amount. Please advise.

I would refer you to the judgment handed down by Laffoy J on 18/04/2008 in the case of Ross -v- C [2007 No 125 MCA]."

13 At all material times since then, it has been the contention of the appellant that his liability and that of his wife (having regard to the relevant provisions of the Taxes Acts) have been settled with the respondent and it has been the contention of the respondent that no such settlement or accord exists.

The assessments

14 On 13 December 2010, the respondent issued various notices of assessment (and amended assessment) of income tax payable by the appellant. According to the terms of the case stated, the notices of assessment covered the years of assessment 2002 to 2006 inclusive, although the copies of those notices appended to that document do not include one for 2002. Copies of the notices of amended assessment for each of the years referred to in the case stated - 2007 to 2009 inclusive - are appended.

15 The notices of assessment covering the years 2003 to 2006 inclusive, and the notice of amended assessment for the year 2007, together covering the period in respect of which the appellant's payment of €12,500, however properly characterised, was made (except for the assessment year 2002, in respect of which the notice of assessment was not before me), asserted an aggregate liability to income tax for that period of €392,611.00, omitting any credit for that payment.

The grounds of appeal against the assessments

16 By various letters dated 27 January 2011, the appellant gave notice of his intention to appeal each of the assessments raised. For each year of assessment, the appellant appealed on the ground that the figure relied upon for "miscellaneous income" as a component of the assessment was "estimated and excessive, and not in accordance with the return submitted." For each of the years of assessment between 2002 and 2008 inclusive, the appellant advanced the following further ground of appeal:

"For the tax years up to and including 31 December, 2008 a settlement has been made with the [respondent] by [the appellant's] legal adviser. The amount offered was accepted by [the respondent] in full and final...