Tax Appeals Commission determination 172TACD2020 regarding Income Tax, 2020

Administrative Decision Number172TACD2020
Date31 March 2013
Subject MatterIncome Tax
A. Introduction
1. This appeal is against an Amended Assessment for the year ending 31 December 2011,
issued by the Respondent on 29 December 2016. The core issue i n the appeal is whether
the grant by Kerry Co-operative Creameries Limited (hereinafter referred to as “Kerry
Co-op”) to the Appellant of a right to subscribe for shares in K erry Co-op and/or the
exercise of that right by the Appellant gave rise to a liability to income tax on the part of
the Appellant.
B. Facts relevant to the Appeal
2. An agreed Statement of Facts was prepared by the parties and submitted to the Tax
Appeals Commission in advance of the hearing. It is appropriate at this juncture to put on
record the Commission’s acknowledgment and appreciation of the co-operative,
pragmatic and efficient manner in which both parties and their respective advisors
prepared for and conducted the appeal.
3. The facts agreed by the parties were that at all material tim es the Appellant owned and
ran a dairy farm in [ADDRESS REDACTED] and traded as a dairy farmer. He was a
member of Kerry Co-op and held [NUMBER OF SHARES REDACTED] Ordinary Shares in
Kerry Co-op as at 31 March 2011.
4. In the Milk Quota Year 1 April 2010 t o 31 March 2011, the Appellant supplied [AMOUNT
REDACTED] litres of milk to Kerry Cr eameries Ltd, a company nominated by the Board
of Kerry Co-op as a nominated purchaser of raw milk from its members. There was no
written contract for this supply. Kerry Creameries Ltd is and was a subsidiary of Kerry
Group plc. On 1 April 2010 Kerry Co-op held 23.82% of the ordinary share capital of Kerry
Group plc, a publicly listed company, but this holding was reduced to 22.83% on 14 March
2011 by the sale of 1.5 million shares.
5. For the milk supplied by the Appellant, the gross amount due to him from Kerry
Creameries Ltd was €[AMOUNT REDACTED] in the Milk Quota year 2010/11. This was
calculated on a total of [AMOUNT REDACTED] litres (before butterfat adjustment)
supplied by the Appellant in the Milk Quota year 2010/11 to Kerry Creameries Ltd. The
price per litre received in each month in the Milk Quota year 2010/11 by the Appellant
for his milk was based on a €/Kg Protein and €/Kg Butterfat price. The Kg prices were
calculated from the maximum attainable price per litre quoted by Kerry Cream eries Ltd
at standard constituents of 3.3% Protein and 3.6% Butterfat which included a
temperature bonus and a VAT Credit. Milk supplied was subject to any quality penalties
and applicable levies. In the Milk Quota year 2010/11, the Appellant received the
following net price per litre of milk supplied to Kerry Creameries Ltd:-
Month Net Milk Value (cent per litre)
April 2010 27.92
May 2010 31.33
June 2010 30.28
July 2010 31.09
August 2010 33.05
February 2011 38.24
March 2011 35.13
6. The average attainable monthly milk price paid by Kerry Creameries Ltd in the Milk Quota
year 2010/11 was published each month in the Creamery League in the Irish Farmers’
Journal. The milk price published each month is based on a return submitted by Kerry
Creameries Ltd to the Irish Farmers’ Journal. This publication includes a comparison of
the price paid by Kerry Creameries Ltd compared to other Co-ops based on a standard
3.6% butterfat and 3.3% protein content to ensure there is a “like for like” comparison of
milk prices between Co-ops. A summary of the “like for like” milk prices between co-ops
from the monthly Creamery League from the Irish Farmer’s Journal for the Milk Year
2010/11 was appended to the agreed Statement of Facts, and this showed that the
monthly milk prices paid by Kerry Creameries Ltd were generally in line with those paid
by other creameries.
7. Under the Rules of Kerry Co-op, the Appellant, as a milk supplier, had a right to be invited
to subscribe at par for one Patronage Share in Kerry Co-op for every 4,546.09 litres of raw
milk supplied by him (ignoring quantities supplied exceeding his quota) in the Milk Quota
Year 2010/11 to Kerry Creameries Ltd. On this basis, the Appellant subscribed for
[NUMBER OF SHARES REDACTED] Patronage Shares for which he paid €[AMOUNT
PAID REDACTED] bringing his total holding of Shares in Ker ry Co-op to [NUMBER OF
8. By Notice of Assessment dated 20 November 2012 for the year which ended on 31
December 2011, the Appellant was assessed to income tax on, inter alia, the declared
profits of his trade as a dairy farmer and h e paid that income tax.
9. By a letter to the Appellant dated 18 November 2016, the Revenue District Manager for
Kerry claimed that the market value of the Patronage Shares for which the Appellant had
subscribed in 2011 needed to be included in the Appellant’s accounts as additional
trading income subject to income tax, USC and PRSI. Accordingly, a Notice of Amended

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