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

Administrative Decision Number68TACD2021
Date08 February 2021
Subject MatterCapital Gains Tax
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.
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.”

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