Revenue Commissioners v Droog

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 31 March 2011
• Neutral Citation: [2011] IEHC 142
• Court: High Court
• Date: 31 March 2011

Revenue Commissioners v Droog

REVENUE

BETWEEN

THE REVENUE COMMISSIONERS

APPELLANT

AND

HANS DROOG

RESPONDENT

[2011] IEHC 142

[No. 1020R/2010]

THE HIGH COURT

REVENUE

Income tax

Time limit - Notice of tax avoidance - Approach to interpretation - Applicability of amendment to statute after the fact to interpretation of statute - Notice stating, inter alia, opinion tax avoidance transaction had occurred - Notice issued to respondent nearly nine years after income tax return relating to transaction filed - Whether Appeal Commissioner correct in law in holding four year time limit applied - Cape Brandy Syndicate v Inland Revenue Commissioners [1921] 1 KB 64 approved - Cronin (Inspector of Taxes) v Cork and County Property Co Ltd [1986] IR 559; Keogh v Criminal Assets Bureau [2004] IESC 32, [2004] 2 IR 159; Harris v Quigley [2005] IEHC 81, [2005] IESC 79, [2006] 1 IR 165; DB v Minister for Health [2003] 3 IR 12 applied - Finance Act 1988 (No 12) - Finance Act 1989 (No 10) - Hepatitis C Compensation Tribunal Act 1997 (No 34), s 5 - Taxes Consolidation Act 1997 (No 39), ss 811, 811A, 895, 922, 933, 924, 941, 950, 951, 955, 956, 957, Parts 33 and 41 - Finance Act 2008 (No 3), s 140 - Appeal dismissed (2010/1020R - Laffoy J - 31/3/2011) [2011] IEHC 142

Revenue Commissioners v Droog

Facts: The respondent had claimed relief for a loss in respect of his share of the losses of a partnership. Short of nine year later, the Revenue Commissioners gave notice in writing of an opinion pursuant to s. 811(6) Taxes Consolidation Act 1997, outlining inter alia that the view had been formed that the transaction outlined was a tax avoidance transaction. The respondent sought to rely upon the provisions of ss. 924, 955 and 956 of the Act of 1997 to the effect that the notice of opinion was out of time. The appeal arose by way of a Case Stated for the opinion of the High Court arising from an appeal brought by the respondent taxpayer. On appeal, the Appeal Commissions found for the respondent whereupon the Revenue Commissioners as appellant requested that a case stated be sent to the High Court for an opinion. The Court was asked to consider whether the Appeal Commission was correct in law in holding that the four-year time limits in ss. 955 and 956 applied to the forming of an opinion under s. 811. The provisions of Part 41 were invoked by the respondent, who contended that a legislative derogation from or exception to the provisions of Part 421 had to be "expressly" provided for.

Held by Laffoy J. that the answer to the question posed in the Case Stated was that the Appeal Commission was correct in law in holding that the four-year time limits provided for in ss. 955 and 956 applied in the forming of an opinion under s. 811S. 811 applied to all taxpayers and all taxes of which the provisions of Part 41 did not apply. The anomaly which existed in 2007 was the consequence of the Oireachtas not having expressly excepted s. 811 from the time bars contained in ss. 955 and 956, which by virtue of s. 950(2) in the absence of such an express exception applied to s. 811.

Reporter: E.F.

TAXES CONSOLIDATION ACT 1997 S941

TAXES CONSOLIDATION ACT 1997 S811(6)

TAXES CONSOLIDATION ACT 1997 S811

TAXES CONSOLIDATION ACT 1997 S811(7)

TAXES CONSOLIDATION ACT 1997 S924

TAXES CONSOLIDATION ACT 1997 S955

TAXES CONSOLIDATION ACT 1997 S956

TAXES CONSOLIDATION ACT 1997 PART XLI

TAXES CONSOLIDATION ACT 1997 PART XXXIII

FINANCE ACT 2008 S140

TAXES CONSOLIDATION ACT 1997 S811A

TAXES CONSOLIDATION ACT 1997 S950(2)

TAXES CONSOLIDATION ACT 1997 S950

TAXES CONSOLIDATION ACT 1997 S895(6)

TAXES CONSOLIDATION ACT 1997 S955(2)(A)

TAXES CONSOLIDATION ACT 1997 S955(1)

TAXES CONSOLIDATION ACT 1997 S955(2)

TAXES CONSOLIDATION ACT 1997 S955(2)(A)(i)

TAXES CONSOLIDATION ACT 1997 S955(2)(A)(ii)

TAXES CONSOLIDATION ACT 1997 S955(2)(B)

TAXES CONSOLIDATION ACT 1997 S955(2)(B)(iii)

TAXES CONSOLIDATION ACT 1997 S956(1)(C)

TAXES CONSOLIDATION ACT 1997 S956(1)(B)

TAXES CONSOLIDATION ACT 1997 S956(1)(A)(i)

TAXES CONSOLIDATION ACT 1997 S956(1)

TAXES CONSOLIDATION ACT 1997 S956(1)(B)(i)

TAXES CONSOLIDATION ACT 1997 S811(4)

TAXES CONSOLIDATION ACT 1997 S811(5)(A)

TAXES CONSOLIDATION ACT 1997 S811(1)

TAXES CONSOLIDATION ACT 1997 S811(2)

TAXES CONSOLIDATION ACT 1997 S811(3)

TAXES CONSOLIDATION ACT 1997 S811(2)(ii)

TAXES CONSOLIDATION ACT 1997 S811(3)(A)

TAXES CONSOLIDATION ACT 1997 S811(3)(A)(i)

TAXES CONSOLIDATION ACT 1997 S811(3)(A)(ii)

TAXES CONSOLIDATION ACT 1997 S811(5)

TAXES CONSOLIDATION ACT 1997 S811(5)(E)

TAXES CONSOLIDATION ACT 1997 S811(9)

TAXES CONSOLIDATION ACT 1997 S811(12)

TAXES CONSOLIDATION ACT 1997 S811A(1A)

CRONIN (INSPECTOR OF TAXES) v CORK & COUNTY PROPERTY CO LTD 1986 IR 559

KEOGH v CRIMINAL ASSETS BUREAU & ORS 2004 2 IR 159 2004 2 ILRM 481 2004/26/6080 2004 IESC 32

TAXES CONSOLIDATION ACT 1997 S922

TAXES CONSOLIDATION ACT 1997 S933

TAXES CONSOLIDATION ACT 1997 S957(2)(A)

CAPE BRANDY SYNDICATE v INLAND REVENUE CMRS 1921 1 KB 64

HARRIS v QUIGLEY (INSPECTOR OF TAXES) & IRWIN (COLLECTOR GENERAL) 2006 1 IR 165

B (D) v MIN FOR HEALTH & HEPATITIS C COMPENSATION TRIBUNAL 2003 3 IR 12 2003/4/812

HEPATITIS C COMPENSATION TRIBUNAL ACT 1997 S5(9)(A)

1. The proceedings

2 2 1.1 This is an appeal by way of Case Stated for the opinion of the High Court pursuant to s. 941 of the Taxes Consolidation Act 1997 ( TCA) by John O'Callaghan (the Appeal Commissioner) arising out of an appeal brought by the respondent taxpayer. On the appeal, the Appeal Commissioner found for the respondent, whereupon the appellant, the Revenue Commissioners, requested that he state a case for the opinion of the High Court.

3 3 1.2 Before identifying the question of law raised on the Case Stated, I propose setting out the factual background to the appeal and the Case Stated.

2. Factual background

2 2 2.1 The respondent filed his income tax return for the fiscal year 1996/1997 on 30 ^th January, 1998. It was filed under the self-assessment system. In the return the respondent claimed relief for a loss of £50,046 in respect of his share of the losses of a partnership named as Taupe Partners, which was involved in the acquisition, distribution and licensing of films. As the Appeal Commissioners pointed out, the tax return was processed in the normal way under the self-assessment system. On 25 ^th February, 1998 the respondent received an assessment for 1996/1997 in accordance with the return, which allowed relief in respect of the loss of £50,046 as claimed.

3 3 2.2 Just short of nine years later, on 22 ^nd February, 2007 a nominated officer of the Revenue Commissioners (the Nominated Officer) gave notice in writing of an opinion pursuant to s. 811(6) TCA to the respondent. There were three elements in the notice. First, the Nominated Officer stated that he had formed the opinion that the transaction he outlined was a tax avoidance transaction within the meaning of s. 811 TCA (s. 811). The details of the transaction referred to an investment under the terms of a partnership agreement and an agreement of adherence, which were identified, and of certain activities carried out by Taupe Partners, the details of which are not of relevance for present purposes. Secondly, the Nominated Officer stated that he had determined the tax advantage which was to be withdrawn from the respondent for, inter alia, the year 1996/1997. In relation to that fiscal year, the tax advantage was set out at £24,022, representing the loss relief at the rate of 48% which the respondent had been allowed on his share of partnership losses amounting to £50,046 for 1996/1997. Thirdly, the Nominated Officer stated that he had determined that, should his opinion become final and conclusive, the loss relief claimed by the respondent would be withdrawn.

4 4 2.3 The respondent appealed pursuant to s. 811(7) to the Appeal Commissioner against the notice of opinion by notice dated 5 ^th March, 2007. One of the grounds relied on by the respondent was that the notice of opinion was out of time by virtue of ss. 924, 955 and 956 TCA.

5 5 2.4 The appeal was heard by the Appeal Commissioner on 20 ^th October, 2009, when it had been listed to deal solely with the ground of appeal by reference to ss. 955 and 956 TCA (s. 955/s. 956). The Appeal Commissioner delivered his determination on 18 ^th December, 2009. His determination, as recorded in the Case Stated, was that the four-year time limits as set out in ss. 955 and 956 applied to the forming of an opinion under s. 811, so that the opinion was not valid. As recorded in the Case Stated, the Appeal Commissioner found as a fact that there was no suggestion of fraud or neglect of the respondent taxpayer in relation to the matters at issue.

3. Question by determination by the Court

2 2 3.1 The question for determination by this Court is whether the Appeal Commissioner was correct in law in holding that the four-year time limits in ss. 955 and 956 applied to the forming of an opinion under s. 811.

4. Statutory provisions in issue

2 2 4.1 I agree with the submission made by counsel for the respondent that it is logical to consider such of the provisions contained in Part 41 TCA (ss. 950 - 959) as are relevant to the issue to be determined by the Court before considering s. 811. The provisions of Part 41, which deal with self-assessment, were invoked by the respondent in making his tax return for the fiscal year 1996/1997. Section 811, which is contained in Part 33 TCA dealing with anti-avoidance, was invoked by the Revenue Commissioners, as I have stated, almost nine years after the respondent was assessed for that fiscal year. The relevant provisions of Part 41, which were originally enacted in the Finance Act 1988, have been amended from time to time but the amendments are...