A farmer and company shareholder has lost a €351,545 capital gains tax (CGT) battle with the Revenue Commissioners.
The Tax Appeals Commission (TAC) ruled that while a share-for-share exchange at the centre of the tax dispute was effected for bona fide commercial reasons, it constituted an arrangement of which the main purpose, or one of the main purposes, was the avoidance of liability to tax.
In finding against the farmer and company shareholder, commissioner Simon Noone upheld a Revenue assessment for the €351,545 which arose on foot of the share-for-share exchange and a subsequent sale of shares.
The farmer had claimed relief from CGT. The Revenue Commissioners raised the amended assessment on the basis that the exchange was not carried out for bona fide commercial reasons but was part of a scheme or arrangement of which the main purpose was avoidance of liability to tax.
In his ruling, Mr Noone found the transaction had been effected for bona fide commercial reasons. He accepted the appellant’s evidence that he had been motivated by a desire to ensure he did not lose his farm and house.
Mr Noone said he found it credible that the transfer of his shares to the holding company formed part of the man’s strategy to protect his home and farm from potential losses on his investments in the future.
However, Mr Noone found that the main purpose, or at least one of the main purposes, of the share-for-share exchange was the avoidance of liability to tax from the transfer and subsequent sale of the shares.
Mr Noone stated that there was evidence to suggest that the appellant had sought to avoid tax on other transactions.
Senior counsel on behalf of the farmer and company shareholder contended that the amended assessment raised by Revenue was incorrect, excessive and should be reduced to nil.
He said the share-for-share exchange had been made for bona fide commercial reasons and in particular in the context of his ongoing attempt to consolidate various assets and investments in one single holding vehicle and to facilitate succession planning.
The barrister contended it was not sufficient for the Revenue Commissioners to conjure up a fog of insinuation and conjecture, and contend that it outweighed the direct evidence given by the appellant and the other witnesses called on his behalf.
The TAC has been requested to state and sign a case for the opinion of the High Court on the determination.
