Tax Appeals Commission determination 68TACD2021 regarding Capital Gains Tax, 2021

• Administrative Decision Number: 68TACD2021
• Year: 2021
• Date: 08 February 2021
• Subject Matter: Capital Gains Tax
• Respondent: THE REVENUE COMMISSIONERS

68TACD2021

Between/

Appellant

-and-

THE REVENUE COMMISSIONERS

Respondent

DETERMINATION

A. Matter under Appeal

1. This matter comes before the Tax Appeals Commission as an appeal against

the Respondent’s decision of the 4th of May 2016 where it refused to allow the

Appellant’s claim under s.538(2) of the Taxes Consolidation Act 1997 as

amended (hereinafter “TCA 1997”) for a loss made on a loan as a consequence

of it having been disposed of at negligible value.

2

B. Facts relevant to the Appeal

2. The Appellant was the holder of €0.01 shares in Limited, which

was at the times material to this appeal the holding company of a French-

registered entity, the sole asset of which at the time of the disposal at issue in

this appeal was a hotel located in in France. The date of registration

of Ltd was the of September 2007.

3. On or about the 1st of October 2007, pursuant to a loan agreement of the same

date, the Appellant advanced the sum of €649,928.57 to Ltd. Under

clause 2 of the aforesaid loan agreement, the sum in question was to be repaid

by Ltd within a period of ten years.

4. Clause 4 of the loan agreement was headed “Conversion” and governed the

right of the Appellant to convert the loan into shares in Ltd. The true

construction of this term of the agreement is central to the determination of

this appeal.

5. Clause 4(a), headed “Conversion Right”, provided that:-

“At any time before repayment of the Loan, the Lender may, by notice in

writing to the Borrower (a “Conversion Notice”), require the Borrower, in

accordance with this clause 4, to convert the Loan into such number of

Relevant Shares as is obtained by dividing the aggregate amount of the Loan

(together with accrued interest thereon) by the Conversion Price on the

terms of and subject to the conditions set out in this Clause 4.”