In a recent case, heard by the Appeal Commissioners, a taxpayer lost a challenge against assessments raised by Revenue in circumstances where the filings were allegedly based on a tax ruling which had been obtained in advance.
The taxpayer alleges to have notified Revenue of an intended transaction and to have obtained a ruling on the relevant tax implications prior to its implementation.
The tax-payer filed tax returns in 2013 and 2014 based on the alleged opinion received. The first tax return, for 2013, was not questioned by the Revenue Commissioners but his 2014 return was examined and this led to a review of submissions for both years.
In or about August of 2015, the tax-payer was advised by the Revenue Commissioners that he was not entitled to relief for the payments and amended assessments issued for both years.
The tax-payer appealed against the assessments on several grounds including that:-
The Revenue Commissioners had advised him prior to entering into the transaction that it would be tax deductible; and,
The Revenue Commissioners accepted his submission for 2013 and so was not entitled to revisit that decision; and
Having agreed to a filing position in 2013, the Revenue Commissioners was obliged to treat his tax 2014 position in a consistentmanner.
Revenue's rejection of the Appeal
The appeal was initially rejected by the Revenue Commissioners on the basis that the taxpayer failed to provide valid grounds for the appeal*.
This decision was overturned by the Appeal Commissioners who held that the refusal by the Revenue Commissioners came about, because the Revenue Commissioners did not accept as valid or meritorious the grounds of appeal rather than because the appeal itself did not meet the statutory requirements.
Reliance on a Revenue ruling
The Appeal Commissioners dealt with the allegation that a Revenue official had advised the taxpayer prior to entering the transaction and therefore ought not to be permitted to deny relief.
It agreed that a statement or representation by a Revenue official could, if proven, give the taxpayer a cause of action founded on the doctrine of legitimate expectation and/or estoppel, or grounds for judicial review. But it concluded that such matters do not fall within the statutory jurisdiction of the Tax Appeals Commission whose essential function is to decide whether an assessment raised by the Revenue Commissioners should be reduced or increased.
The Appeal Commissioners do not have power to enforce their decision nor to impose liabilities and therefore any alleged representation or action arising therefrom cannot be considered as a valid grounds for appeal.
Reliance on Revenue treatment in a prior year
The final ground of appeal put forward by the taxpayer was that the Revenue Commissioners could not revisit the first tax filing and it was obliged to apply consistent treatment in 2014.
The Appeal Commissioners rejected the taxpayers claim that the Revenue Commissioners is required by law to apply consistent treatment to 2014.
In relation to this ground of appeal, the Appeal Commissioners accepted, and found as a material fact, that the taxpayers 2013 tax return was processed on the normal, self-assessment basis and was not the subject of any scrutiny or detailed consideration by the Revenue Commissioners.
The fact that the 2013 return was processed without being questioned by the Revenue Commissioners, and the fact that the taxpayer received a repayment in that year, does not precluded an amending to the taxpayers 2013 assessment.
The facts of this case highlight the weakness in relying on Revenue opinions in relation to large transactions. It should also serve to underline the risk with continuing to adopt a tax filing position merely because Revenue have issued assessments on a same basis in previous tax years.
It is important that tax rulings are handled by a suitably qualified taxation expert and in such a manner as to protect your legal rights.
* Note that appeals are no longer submitted to the Revenue Commissioners.