A company director has failed in a legal challenge to prevent Revenue conducting an inquiry into payments totalling almost €373,000 into an Isle of Man bank account almost 25 years ago.
The Tax Appeals Commission ruled that the Revenue is entitled to continue with an investigation that tax officials began in 2012 as it held reasonable grounds at the time that tax returns filed by the director had been completed in either a fraudulent or negligent manner.
The TAC heard that Revenue had received notification from AIB of a series of four offshore transactions associated with the company director totalling €373,000, which were paid into an AIB account in the Isle of Man between November 1996 and December 1997.
When asked about the payments by Revenue in May 2010, the director said the account belonged to his late brother but he had a fiduciary role in looking after it.
The appellant said he had inherited the funds in the Isle of Man account worth just over €1.6 million, and his tax agents had been making arrangements to transfer the money to him and to pay the appropriate inheritance tax.
At that time Revenue informed the director that it was treating the matter as closed. However, a further explanation for the four payments was sought in 2012 after the man’s file was reviewed by Revenue’s Offshore Asset Group in August 2012, and it discovered the lodgements were made by drafts paid out to him.
In response, the director claimed Revenue was outside the four-year time limit to examine such matters.
Funds
An official from Revenue’s investigations and prosecutions division, Henry Oliver, told the TAC that the tax authorities did not accept the director had received an inheritance from his brother.
Mr Oliver said the facts of the case required a serious review of the source of the funds.
He noted that the claimant only listed being a director of two companies in his tax returns for 1996-1998, at a time when he was also the director of three or four other companies, while there was no reference to the Isle of Man account which was in the name of the man and his wife.
The TAC heard that the appellant had only filed an inheritance tax shortly after he had received queries from Revenue about the Isle of Man account, which was more than five years since his brother’s death.
Mr Oliver said the timing of the filing provided him with reasonable grounds to believe the account belonged to the director and the lodgements were money earned by him.
Lawyers for Revenue claimed the failure to declare the foreign bank account which was opened in 1991 was negligent and/or fraudulent.
Late brother
However, lawyers for the businessman said there were no reasonable grounds for such a belief as their client had provided a signed declaration by his late brother that he was the beneficial owner of the account and that the appellant had declared and paid capital acquisitions tax of €320,945 on receiving the entire proceeds of the account as a gift.
They pointed out all such information was available to Revenue in 2010 when the tax authorities first said they were treating the matter as closed.
In its ruling the TAC said the fact that a tax inspector had previously formed a different view does not prevent them from subsequently reaching a different conclusion.
TAC commissioner Mark O’Mahony said he accepted the evidence of a Revenue witness that the explanation provided by the appellant in 2010 was reviewed in 2012, and no longer found credible or satisfactory.
