Revenue concerned over tax avoidance scheme, court hears

THE REVENUE Commissioners were concerned a scheme allegedly involving 26 wealthy individuals here was a tax-avoidance scheme that could result in up to €110 million tax losses to Revenue, according to documents put before the Commercial Court.

Various communications to Revenue officials during 2010 and into 2011 concerning the nature of the scheme had stated it involved using artificial capital losses to shelter capital gains, with a consequent benefit to the individual and loss to the Revenue.

Memos and other documents provided to the court referred to tax-avoidance schemes possibly resulting in hundreds of millions of euro in losses to Revenue.

The scheme was investigated by the Revenue’s large cases division and reports were provided to the three Revenue Commissioners themselves, according to documents. Of the 26, six had used “straddle” transactions, while 20 used a combination of gilt instruments and contracts for difference, the court heard.

Yesterday, senior counsel Michael Collins, for four businessmen challenging the issuing of formal Revenue opinions that their claims for substantial capital gains losses should be disallowed, argued the Revenue was required to issue those formal notices once it decided a tax advantage was being gained from a transaction. Such notices under the “draconian” section 811 provision of the tax Acts must be issued “immediately”. The view was taken the transaction involved a tax advantage but that did not occur in these cases, counsel said.

The Revenue, he argued, had decided at the highest level sometime in 2010, or January 2011 at the latest, that these transactions were for a tax advantage, but failed to issue the relevant notices to the four until July-August 2011.

In evidence, Breda Ruddle, a Revenue officer who headed the investigation, told Mr Justice Brian McGovern the Revenue did not really understand the computations of the transactions as they “made no commercial sense”.

People from the National Treasury Management Agency and the Smurfit Business School, plus experts, were asked to look into the transactions and the report was received by Revenue in January 2011, she said.

Section 811 is a complex piece of legislation and the transactions had to be examined in light of all its provisions, Ms Ruddle added.

The challengers are: Ronan McNamee, a businessman of Temple Road, Dartry, Co Dublin; 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.