A High Court ruling today in favour of the Revenue concerning an alleged tax avoidance scheme could yield up to €110 million tax payments to the Revenue from 26 wealthy individuals here.
Mr Justice Brian McGovern rejected a challenge by one of the 26 to a Revenue opinion notice issued to him that certain transactions were tax avoidance transactions under Section 811 of the Tax Acts with the effect tax advantage would be withdrawn and claims for capital gains losses disallowed.
The judgment has implications for three similar challenges and all 26 individuals with the amount of tax involved estimated at up to €110 million.
The action was brought by Ronan McNamee, a businessman of Temple Road, Dartry, Co Dublin. He brought his case arising from two financial transactions entered into by him and his wife about September 2009 and a Revenue opinion notice of August 2011 that those were tax avoidance transactions.
The transactions involved financial "straddles", one involving Government gilts and the other foreign currency, and a Revenue officer issued an opinion notice of August 2011 they were tax avoidance transactions under Section 811 meaning tax advantage would be withdrawn and Mr McNamee's claim for capital gains losses of some €6.2 million disallowed.
Three other challenges over similar "straddle" transactions will be affected by the judge's findings. Those were brought by Derek Whelan, a company director, Foxrock Manor, Foxrock, Dublin; John Punch, The Park, Cobh, Co Cork, and Martin Punch, a company director, The Fountain, Glanmire, Co Cork.
In all four cases, it was claimed the disputed Revenue decisions arose from pre-determined views within Revenue that several people were engaged in tax avoidance via arrangements to create and use contrived capital losses. The four claimed the Revenue was obliged, but failed, to issue Section 811 notices "immediately" after it decided the transactions involved a tax advantage.
It was also claimed Revenue Commissioner Martin O'Grady prejudged the applicants' position in circumstances including having allegedly either received, or himself sent, emails containing reference to anti-avoidance activity of the Revenue in 2009.
It was alleged the Revenue had during 2010 identified about 26 cases in which identical or very similar arrangements were concluded via a London-based global assets management company and had referred to those as the "Schroders Ready-Made 26".
The Revenue denied the claims and argued it required time and the engagement of experts to understand the alleged tax avoidance scheme. It was appropriate for it to gather information before deciding to issue the notices under Section 811, it said.
Today, Mr Justice McGovern said, while the Revenue had looked at the Schroeders Ready-Made 26 group as a whole to establish if there was a pattern of activity leading to possible tax avoidance which required further investigation, there was no evidence the revenue treated the members of the group of 26 as one single group.
The Revenue would not have been permitted under the legislation to treat the 26 as a group and could not decide how to challenge any particular scheme until detailed information was sought from the relevant taxpayer or their tax agent, he said.
The notice of opinion in Mr McNamee's case of August 2011 was given "immediately" after the nominated Revenue officer formed the opinion the transactions were tax avoidance transactions, the judge found. The officer had to consider all the relevant criteria set out in Section 811 before issuing the notice, he said.
The judge also rejected arguments the opinion was tainted by prejudgment or apparent bias. Nor were the roles played by Mr O'Grady or by the nominated officer tainted by actual or apparent bias, he ruled.
