The liquidators of Irish Bank Resolution Corporation (IBRC) have lost an appeal against a 2017 London court ruling that stopped them clawing back taxes paid in the UK by Anglo Irish Bank and Irish Nationwide Building Society.
The amount involved was previously reported to be in the region of £20 million (€22.5 million). Anglo Irish Bank was renamed as IBRC in 2011 and subsequently took over Irish Nationwide before the entire group was put into liquidation in February 2013. The two failed lenders cost taxpayers €34.7 billion in bailouts before they were wound down.
Mr Justice Marcus Smith and Judge Timothy Herrington of the Upper Tribunal Tax and Chancery Chamber this week dismissed the liquidators' case and ordered that any application for costs be filed within a month.
The case relates to IBRC’s contention that Anglo Irish Bank – going by its subsequent name, IBRC, in the court documents – and Irish Nationwide should not have been subject to certain taxes that were charged in the UK before the financial crisis.
Double taxation
The liquidators argued against how Her Majesty’s Revenue and Customs (HMRC) had applied Ireland’s double-taxation agreement with the UK, dating from 1976.
HMRC disallowed attempts by both lenders to seek tax deductions resulting from interest paid by their UK businesses – which are referred to as permanent establishments in the country – to their parents in Dublin.
HMRC said that the UK divisions “understated the amount of equity capital each permanent establishment was deemed to hold and so overstated the amount of loan capital and the associated interests charges”, according to the ruling.
IBRC’s liquidators had argued the UK tax authorities were now allowed by the double-taxation accord to disallow the deduction of interest paid.
The judges said that their conclusion was “entirely consistent” with foreign case law that was shown to them by the parties involved in the case.
