A developer firm has been left with a €755,445 corporation tax bill arising from a land site “fiasco” where a plot bought for €8.6 million collapsed in value to €170,000.
This follows a Tax Appeals Commission (TAC) ruling that the unnamed company is liable for the €755,445 corporation tax bill arising from a bank forgiving a €6 million part of a loan provided to the company used to purchase the €8.6 million site for housing in 2006.
Ten years later in 2016, after the economic crash, the €8.6 million site was valued at between €180,000 and €198,000 and failed to sell at auction, with the highest bid recorded at €170,000.
The site included 19 acres zoned residential.
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The finance director with the firm and a chartered accountant told a TAC hearing that the firm paid the bank €250,000 as part of the €6 million loan forgiveness settlement in 2016 in order to bring the whole “fiasco” to a close.
The Revenue Commissioners issued the corporation tax assessment of €755,445 in 2021 after concluding that the forgiveness of the loan facility should be treated as taxable income.
The firm appealed the assessment and, now, after a hearing into the case, Appeals Commissioner, Clare O’Driscoll has upheld the Revenue assessment after finding that the loan forgiven must be treated as a receipt in the firm’s trade.
The €6 million loan forgiveness was part of an initial €9.5 million loan provided to the firm by the bank in 2006 to purchase the site. The firm did not seek planning permission for houses on the site due to the economic crash.
The firm had repaid €3.5 million in capital and €2.1 million in interest on the loan leaving €6.04 million to be repaid.
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The company argued that the forgiveness of the loan should not be treated as income and was instead a transaction on a capital account.
The firm included the €6 million sum as a credit sum below the gross profit line in its 2016 accounts on the basis that the amount of the debt write-off did not represent a trading profit.
The TAC decision stated that it has been requested to state and sign a case for the opinion of the High Court in respect of its determination.
