Tax Appeals Commission determination 93TACD2021 regarding Income Tax - Tax Avoidance, 2021

Administrative Decision Number93TACD2021
Date30 April 2021
Subject MatterIncome Tax - Tax Avoidance
AppellantREVENUE COMMISSIONERS
RespondentAppellant
93TACD2021
Appellant
Respondent
THE APPELLANT
V
REVENUE COMMISSIONERS
DETERMINATION
Introduction
1. The Appellant is one of 4 Appellants and it has been agreed between the parties that
this Appellant would take the lead appeal.
2. The primary issue in this appeal concerns interest relief claimed by the Appellant in the
tax years ending 31 December 2006 to 31st December 2011 inclusive pursuant to Taxes
Consolidation Act 1997 (TCA), section 248 as extended by section 250 in respect of loans
taken out in December 2005 to invest in two private unlimited companies, P and L.
Claims for interest relief were made as follows:
(a) Year Ended 31st December 2006 285,753
(b) Year Ended 31st December 2007 325,858
(c) Year Ended 31st December 2008 314,632
(d) Year Ended 31st December 2009 €280,250
(e) Year Ended 31st December 2010 314,632
(f) Year Ended 31st December 2011186,421
3. The Respondent challenged the Appellant’s interest relief claims based on the following
statutory provisions, namely:
(a) TCA, section 248;
(b) TCA, section 250, and
(c) TCA, section 817A;
4. The Respondent’s principle objection to the Appellant’s entitlement to a deduction for
the interest paid on the monies borrowed to acquire shares in P and L is on the basis
that the additional interest incurred by the Appellant on borrowings to acquire such
shares was ameliorated by a circuitous arrangement involving Forward Currency
Contracts between S and Bank and Financial Spread Bet Agreements entered into by the
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Appellant’s former spouse and S. In this regard, the Respondent argued that the
Appellant enjoyed a disproportionate tax saving without the burden of the economic
consequences as envisaged by the Oireachtas.
5. The Respondent therefore denied the relief by amending the notices of assessment for
the years ended 31st December 2006 to 31st December 2011 inclusive.
6. At the hearing the parties identified the following six issues that required consideration:
(a) Is TCA, section 248(3) applicable to Section 250 TCA?
(b) If the Appellant satisfies the conditions for interest relief pursuant to TCA, section
250(2), is he also subject to the conditions in section 248(3)?
(c) Was the interest on the loans ‘paid’ within the meaning of TCA, section 248?
(d) Whether there were ‘loan extensions’ in 2007 or actually new loans, with the
result that interest relief is not due for the years 2008-2011?
(e) In the year ended 31 December 2011, was L a company of the kind referred to in
TCA, section 248(1)(a)(i) or (ii)?
(f) If the Appellant is entitled to relief under section 248 as extended by section 250,
is the relief disallowed under section 817A?
Legislation
7. TCA, section 248 provides for a deduction for interest paid on a loan against total
income in certain circumstances where, inter alia, the individual holds a material
interest in the company and has worked for the greater part of his time in the
management or conduct of the business of the company or a connected company from
the application of the loan proceeds until the interest is paid. TCA, section 250 provides
relief in circumstances where an individual was not fulltime employed or did not hold a
material interest in the company.
8. During the period of the Appellant’s investment, TCA, section 248 provided:
(1) This section shall apply to a loan to an individual to defray money applied
(a) in acquiring any part of the ordinary share capital of
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(i) a company which exists wholly or mainly for the purposes of
carrying on a trade or trades or a company whose income
consists wholly or mainly of profit s or gains chargeable under
Case V of Schedule D, or
(ii) a company whose business consists wholly or mainly of the
holding of stocks, shares or securities of a company referred
to in subparagraph (i),
(b) in lending to such a company referred to in paragraph (a) money
which is used wholly and exclusively for the purposes of the trade or
business of the company or of a connected company, or
(c) in paying off another loan where relief could have been obtained
under this section for interest on that other loan if it had not been paid
off (on the assumption, if the loan was free of interest, that it carried
interest).
(2) Relief shall be given in respect of any payment of interest by the individual on
the loan if
(a) when the interest is paid the individual has a material interest in the
company or in a connected company,
(b) during the period taken as a whole from the application of the proceeds of
the loan until the interest was paid, the individual has worked for the
greater part of his or her time in the actual management or conduct of
the business of the company or of a connected company, and
(c) the individual shows that in the period referred to in paragraph (b) he or
she has not recovered any capital from the company or from a connected
company, apart from any amount taken into account under Section 249.
(3) Relief shall not be given in respect of any interest by an individual on a loan
applied on or after the 24th day of April 1992, for any of the purposes
specified in subsection (1) unless the loan is applied for bona fide commercial
purposes and not as part of a scheme or arrangement the main purpose or
one of the main purposes of which is the avoidance of tax.
(4) Subsection (1) shall not apply to a loan unless it is made in connection with
the application of the money and either on the occasion of its application or

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