Revenue Commissioners v Lacey

JudgeMr. Justice Binchy
Judgment Date31 July 2015
Neutral Citation[2015] IEHC 529
CourtHigh Court
Date31 July 2015

[2015] IEHC 529


[No. 533 R/2013]
Revenue Commissioners v Lacey
Approved Judgment
No Redaction Needed





Revenue – Taxation – Assessment in relation to the relief claimed – Time limitation – Ss. 941 and 955 of the Taxes Consolidation Act, 1997 – Whether it would be open to the appellants to raise an assessment in relation to the relief claimed at any time, or whether the raising of such an assessment would be subject to the time limit prescribed by S. 955(2) of the Act.

Facts: The appellant sought an order for quashing the decision of the Appeal Commissioner holding that the assessment would be precluded by statute. The respondent contended that the appellants would be precluded from raising assessment after the end of four years as prescribed under s. 955(2) of the Act. The appellants contended that in making the determination, the Appeals Commissioner had erred in the interpretation of ss. 481(19), 950(2) and 955(2) of the Act and therefore erred in accepting the argument of the respondent that section 950(2) of the Act operated in priority to the provisions of section 481(19) of the Act.

Mr. Justice Binchy held that the application for an order seeking an order quashing the decision of the Appeal Commissioner would be denied. The Court held that the Appeal Commissioner would be correct in law. The Court observed that the assessment under appeal was void and was barred by limitation statute.


JUDGMENT of Mr. Justice Binchy delivered on the 31st day of July, 2015.


1. This matter comes before the Court by way of case stated from Mr. John O'Callaghan, Appeal Commissioner, pursuant to section 941 of the Taxes Consolidation Act, 1997. The appeal relates to an assessment to income tax for the year 1994/95 which was raised by the appellants on 26 th July, 2005. The Appeal Commissioner held that the assessment was precluded by statute and the appellants appeal this finding.


2. There is no dispute about the background facts giving rise to the assessment and appeal. These may be taken directly from the case as stated and are as follows:-


a a. At all material times the respondent was a "chargeable person" for the purpose of chapter II of the Finance Act, 1988, (now part 41 of the Taxes Consolidation Act, 1997 (hereinafter referred to as the " TCA")).


b b. In or about 4 April, 1995, the respondent invested the total sum of IR£25,000.00 in the "qualifying companies" Derima Ltd., Vernill Ltd., Cherlan Ltd., Atelina Ltd. and Lenama Ltd. collectively known as the "First Merlin Film Fund".


c c. The respondent received five Film 3 certificates issued in January 1996, for the year of assessment 1994/95 by the said "qualifying companies". Each of the certificates contained a statement that "the conditions for the relief so far as they apply to the company and the film are satisfied in relation to this investment".


d d. In his return of income tax for the year 1994/95 the respondent claimed relief under section 35 of the Finance Act 1987, which the inspector allowed on the basis of the aforesaid Film 3 certificates.


e e. A tax audit of the "qualifying companies" was carried out in or about 28 August, 2002 as a result of which the inspector concluded that the conditions governing the relief had not in fact been satisfied by the "qualifying companies" and/or in respect of the films concerned.


f f. The relevant conditions in the legislation and the certificate of the Minister for Arts, Heritage, Gaeltacht and the Islands are:


(i) the relevant investment is used within two years in the production of a qualifying film;


(ii) the sum raised in respect of which relief is claimed under section 481 of the TCA does not exceed a percentage of the actual cost of production of the film, and


(iii) a specified sum must be expended on direct expenditure in the employment of Irish personnel and the purchase of Irish goods and services.


If it subsequently transpires that these conditions have not been satisfied, provision is made for the withdrawal of the relief already given.


g g. The inspector found that the amounts invested were part of a fund intended to be used to produce a number of films. The fund was distributed among the five companies. A substantial part of the fund was paid to a Galway company, Concorde Anois Teo.


h h. From the records and the accounts available to the inspector, he took the view that part of the money had been used in the production of the various films and part had been transferred to Transpacific Corporation A.V.V. Aruba.


i i. The inspector was not satisfied that the money transferred to Transpacific Corporation A.V.V. Aruba had been expended on the production of the films.


j j. Accordingly the respondent and all other taxpayers in the same fund (The First Merlin Film Fund) were notified that the inspector intended to withdraw the relief claimed by him and them pursuant to section 481 of the TCA. The said relief was withdrawn by notices of assessment dated 26 th July, 2005 issued pursuant to section 481(19) of the TCA relating to the years 1994/95. Notices of assessment dated 26 th July, 2005 and 20 th September, 2005 issued pursuant to section 481(19) of the TCA and relating to the years 1994/95 and 1995/96 were sent to the taxpayers in the other funds.


k k. The respondent, by notice of appeal dated 8 th August, 2005, appealed against the said assessment on the grounds set out therein including the ground that "this assessment is out of time" and "that the time limit for making the assessment is passed".


l l. It is agreed that no issue of fraud or neglect arises on the part of the respondent.


m m. The appellants and 964 other taxpayers who have appealed similar assessments withdrawing relief granted to them in respect of six film funds have agreed that the outcome of this appeal shall govern each of their appeals at least insofar as the time limit element is concerned and a significant number of the other taxpayers have agreed with the appellants that all matters relating to their appeals (the time limit element and the element dealing with whether the conditions for relief under section 481 of the TCA have been satisfied) shall be governed by the outcome of the respondent's case.

Statutory Background

3. The relief claimed by the respondent was claimed under section 35 of the Finance Act, 1987, which is a very comprehensive section setting out the terms upon which the relief maybe claimed. Section 35(4) of the that act provided:

"A claim to relief under this section may be allowed at any time after the payment of a sum to a qualifying company, which, if it is used within two years of it being paid by the qualifying company for the production of a qualifying film, will be a relevant investment, if the inspector is satisfied that all the conditions for relief are, or will be, satisfied, but the relief shall be withdrawn if, by reason of the happening of any subsequent event or the failure of an event to happen which at the time the relief was given was expected to happen, it appears that the company making the claim was not entitled to the relief allowed."


4. Section 35(6) of the 1987 Act provided:-


"Where any relief has been given under this section which is subsequently found not to have been due, it shall be withdrawn by making an assessment to corporation tax or income tax, as the case may be, under Case IV of Schedule D for the accounting period or accounting periods, or the year of assessment or years of assessment as the case may be, in which relief was given and, notwithstanding anything in the Tax Acts such an assessment may be made at any time".


Section 35(4) of the Finance Act, 1987 was replaced by section 481(11) of the TCA 1997 and section 35(6) of the 1987 Act was replaced verbatim by section 481(19) of the TCA.


5. Part 41 of the TCA introduced the concept of self assessment of chargeable persons to income tax, corporation tax and capital gains tax. It sets out, inter alia, the procedures and time limits for the filing of returns, the payment of tax including preliminary tax, the making and amendment of assessments by an inspector on foot of (or in default of) a return, the inspector's right to make inquiries and amend assessments and appeals against assessments. Section 950(2) of the TCA provides that:-

"Except insofar as otherwise expressly provided, this Part shall apply notwithstanding any other provisions of the Tax Acts or the Capital Gains Tax Acts."


6. Section 954(1) of the TCA provides that:-


"An assessment shall not be made on a chargeable person for a chargeable period at any time before the specified return date for the chargeable period unless at that time the chargeable person has delivered a return for the chargeable period, and an assessment shall not be made at a time when the making of the assessment is precluded under section 955(2)."


7. Section 955(1) of the TCA provides that:-

"Subject to subsection (2) and to section 1048, an inspector may at any time amend an assessment made on a chargeable person for a chargeable period by making such alterations in or additions to the assessment as he or she considers necessary, notwithstanding that the tax may have been paid or repaid in respect of the assessment and notwithstanding that he or she may have amended the assessment on a previous occasion or on previous occasions, and the inspector shall give notice to the chargeable person of the assessment as so amended."


8. Section 955(2) of the TCA , as amended by section 17(1)(g) of...

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