Tax Appeals Commission determination 42TACD2024 regarding Income Tax, 2024

• Administrative Decision Number: 42TACD2024
• Year: 2024
• Date: 20 December 2023
• Subject Matter: Income Tax
• Respondent: THE REVENUE COMMISSIONERS

1

42TACD2024

Between:

Appellant

and

THE REVENUE COMMISSIONERS

Respondent

_________________________________________________

Determination

_________________________________________________

2

Table of Contents

Introduction ......................................................................................................................................... 3

Background ......................................................................................................................................... 3

Legislation and Guidelines .............................................................................................................. 6

Evidence and Submissions ........................................................................................................... 11

Appellant’s Witness Evidence – ....................................................................... 11

Appellant’s Submissions ............................................................................................................... 12

Respondent’s Witness Evidence – .................................................. 21

Respondent’s Submissions .......................................................................................................... 33

Admissibility of Expert Evidence ................................................................................................. 36

Material Facts .................................................................................................................................... 40

A secondary market existed for investments in the Fund in June 2007: ............................... 44

At the time of the acquisition of the Appellant’s interest in the Fund in June 2007, it could

have been reasonably expected that at some time during the period of the following 7

years an investor would be able to realise the value of the interest in the Fund whether by

transfer, surrender or in any other manner: ............................................................................... 47

The restrictions on the transfer and redemption of the Participating Shares and Loan

Notes which required the Fund’s permission for the transfer and/or redemption of same

amounted to an effective prohibition on the transfer of Participating Shares: ...................... 53

The NAV of the Fund could only have been realised by an investor if he or she had the

right to approach the Fund and ask it to pay out on his or her Participating Shares at a

value proportionate to the NAV of the Fund:.............................................................................. 59

Final findings of material fact: ....................................................................................................... 64

Analysis .............................................................................................................................................. 68

Determination .................................................................................................................................... 70

Notification......................................................................................................................................... 70

Appeal ................................................................................................................................................. 71

3

Introduction

1. This appeal comes before the Tax Appeals Commission (hereinafter the “Commission”)

against Notices of Amended Assessment to income tax for the years 2017 and 2019 raised

by the Revenue Commissioners (hereinafter the “Respondent”) on 9 December 2022.

2. The Appellant lodged a Notice of Appeal with the Commission in relation to the Notices of

Amended Assessment on 7 January 2023.

3. The amount of tax in dispute is €200,537.13.

Background

4. (hereinafter the “Appellant”) is a businessman and taxpayer who, in or

around May / June 2007, made an investment in the

(hereinafter the “Fund”).

5. The Fund was incorporated on April 2007 and was not tax resident in

Ireland. The Fund was promoted by (hereinafter the “Bank”) and was

incorporated for the purpose of raising funds for investment, in the main, in

investment properties.

6. The Appellant’s investment in the Fund took the form of a Capital Commitment Agreement

which he entered into. The Capital Commitment Agreement required the following from

investors in the Fund:

i. 10% of the Capital Commitment in the form of Participating Shares; and

ii. 90% of the Capital Commitment in the form of an interest free, non-recourse,

subordinated loan evidenced by way of Loan Notes.

7. It is agreed between the Appellant and the Respondent (hereinafter the “Parties”) that the

Capital Commitment Agreement entered into by the Appellant was for a total of

€ . The Commissioner has not been furnished with a copy of the Capital

Commitment Agreement entered into by the Appellant but has been furnished with a copy

of a Capital Commitment Agreement which was entered into by a third party. The Parties

agree that the contents of the third party Capital Commitment Agreement are the same in

all respects as the Capital Commitment Agreement entered into by the Appellant.

8. It is agreed between the Parties that, as a result of the Capital Commitment Agreement

entered into by the Appellant,

. The Commissioner has not been furnished with