Revenue Commissioners v Collins

• Jurisdiction: Ireland
• Judge: Mr. Justice Gerard Hogan
• Judgment Date: 19 October 2017
• Neutral Citation: [2017] IECA 264
• Date: 19 October 2017
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2017] IECA 264 Record No. 2016/581,[C.A. No. 581 of 2016]

[2017] IECA 264

THE COURT OF APPEAL

Hogan J.

Finlay Geoghegan J.

Irvine J.

Hogan J.

Neutral Citation Number: [2017] IECA 264

Record No. 2016/581

BETWEEN/

THE REVENUE COMMISSIONERS

APPELLANTS

- AND -

THOMAS COLLINS

RESPONDENT

Case stated – Non-principal private residence charge – Income tax – Appellants seeking to state a case – Whether the non-principal private residence charge is deductible against rental profits under s. 97(2) of the Taxes Consolidation Act 1997 as being any rate levied by a local authority

Facts: The respondent taxpayer, Mr Collins, was the owner of six rental properties to which the annual non-principal private residence charge (NPPR) was applicable. In the tax year 2009 he had paid the NPPR charge, being €200 per each property. Mr Collins then sought to deduct the sum of €1,200 against rental income received under s. 97(2)(b) of the Taxes Consolidation Act 1997. The appellants, the Revenue Commissioners, stated a case before the High Court. The question for the High Court to determine was as follows: Whether the NPPR charge chargeable pursuant to the Local Government (Charges) Act 2009 is deductible against rental profits under s. 97(2) of the 1997 Act as being any rate levied by a local authority. In the High Court Reynolds J answered that question in the affirmative. The Revenue Commissioners appealed to the Court of Appeal against that decision.

Held by Hogan J that since he was of the view that as the NPPR charge is not a charge which has been levied by a local authority, the taxpayer cannot bring himself within the scope of the deductibility provisions of s. 97(2)(b) of the 1997 Act.

Hogan J held that he would allow the appeal and answer the question posed in the case stated in the negative.

Question answered in Case Stated.

JUDGMENT of Mr. Justice Gerard Hogan delivered on the 19th day of October 2017

1 This appeal raises the question of whether the annual non-principal private residence charge ('NPPR') is a deductible expense as against rental income for income tax purposes. This arises in the present case because the respondent taxpayer, Mr. Thomas Collins, is the owner of six rental properties to which the NPPR charge was applicable. In the tax year 2009 he had paid the NPPR charge, being €200 per each property. Mr. Collins then sought to deduct the sum of €1,200 against rental income received under s. 97(2)(b) of the Taxes Consolidation Act 1997 ('the 1997 Act'). The net issue in this appeal is whether these charges are so deductible.

2 The appeal originally came before the High Court by way of case stated from the Appeal Commissioners. The question for the Court to determine is as follows:

'Whether the Non-Principal Private Residents charge (hereinafter referred to as the 'NPPR charge') chargeable pursuant to the Local Government (Charges) Act 2009 is deductible against rental profits under s. 97(2) of the Taxes Consolidation Act 1997 (hereinafter referred to as 'the TCA 1997') as being 'any rate levied by a local authority'.

3 In the High Court Reynolds J. answered this question in the affirmative: see Revenue Commissioners v. Collins [2016] IEHC 748. The Revenue Commissioners have now appealed to this Court against that decision.

4 The NPPR charge was in some respects a forerunner to the more general form of property tax which has now replaced it. The point raised in the case stated is nonetheless of some general importance since, as we were informed at the hearing, where there are several other cases awaiting the outcome of this appeal.

5 The NPPR charge was introduced by the Local Government (Charges) Act 2009 ('the 2009 Act') and the Act itself was commenced by statutory instrument on the 24th July, 2009. The charge was introduced as an imposition on the owners of all residential properties other than the taxpayer's principal private residence. The charge thus applied to second homes such as holiday homes and rental properties. As I have already indicated, the only issue, therefore, which this Court is required to determine is whether the NPPR charge should be allowed as a deductible expense from rental profits.

6 It is accepted that the NPPR was introduced for the purpose of assisting local authorities to fund local services. An annual charge of €200 per property applied from 2009 to 2013 in respect of residential property which was not the taxpayer's only or main residence for those years. The charge was collected by each local authority and retained by the local authority for its use. To that extent, therefore, the 2009 Act sought to address a perceived funding deficit for local authorities caused in part by the abolition of domestic rates in 1978 by the Local Government (Financial Provisions) Act 1978. For the reasons I am about to state, however, that does not mean necessarily mean that the NPPR should be regarded as a 'rate levied by a local authority' within the meaning of s. 97(2)(b) of the 1997 Act. Before considering that issue, however, it is first necessary to set out the relevant legislation.

The relevant legislation

7 Section 1 of the 2009 Act provides that the word 'charge' has the meaning assigned to it by s. 3(1) and (2). The section provides as follows:

'3(1) A person who, on such date (in this Act referred to as the 'liability date') falling in the year 2009 as is prescribed, is the owner of a residential property shall be liable to pay the sum of €200 (in this Act referred to as a 'charge') to the relevant local authority.

(2) A person who, on 31 March (in this section also referred to as the 'liability date') of each year subsequent to the year 2009, is the owner of a residential property shall be liable to pay the sum (in this Act also referred to as a 'charge') specified in subsection (3) to the relevant local authority.'

8 While s. 3 prescribed an annual charge of €200, s. 3(5) envisaged that the amount of the charge might be varied by ministerial order having regard to changes in the consumer price index:

'(5) The Minister may from time to time review the amount of the charge in subsection (2) and, having regard to any change in the consumer price index since the amount of the charge was last specified or prescribed under this section, prescribe a revised amount as the Minister considers appropriate, and that amount shall have effect for and from the next liability date until further varied.'

9 Section 97(2) of the 1997 Act (as amended) provides for the deductibility of certain expenses from...