Eighty two high net worth individuals face a potential tax liability of €43.8 million before interest and penalties.
An investigation by the Revenue Commissioners’ large cases division has identified a number of cases where taxpayers had structured their tax affairs in such a way that they extracted large amounts of cash from profitable trading companies without paying any tax.
In a written Dáil reply to Fianna Fáil finance spokesman Michael McGrath on the issue, Minister for Finance Paschal Donohoe said the Revenue investigation, dating back to 2011, had identified 120 individuals who had taken cash from their companies in this way.
He said a circuit court decision last year regarding the tax treatment of the transfer of share rights from a company to its shareholders has upheld the Revenue’s view that income tax was due on these transactions.
Minister Donohoe said that “82 cases remain open and the amount of tax at stake in these cases amounts to approximately €43.8 million, based on the transfer of share rights valued at over €100 million”.
He said: “It is not possible to quantify the amount of interest and penalties that may become due in relation to the outstanding tax should Revenue be successful in these cases, but any interest and penalties that become due will be calculated in accordance with the relevant legislation.
“As the taxpayers involved are awaiting dates for hearings of their own tax appeals, it is not possible to specify the timeframe for receipt of any such tax, interest and penalties.”
The minister said that, since 2014, a number of taxpayers involved had come forward to settle their cases. The yield in those cases, comprising tax, interest and penalties, amounted to €11.8 million.
Others are currently engaging with Revenue with a view to settling their cases and payments on account have been made in a number of cases amounting to €937,000.
The Minister said the scheme worked primarily by the transfer of valuable rights attaching to shares owned by a company to shares owned by its members.
“Revenue’s view is that the movement in rights attaching to a class of shares owned by a company to a class of shares owned by its members is a transaction chargeable to income tax as a distribution pursuant to section 130(3)(a) of the Taxes Consolidation Act 1997.
Revenue has raised amended income tax assessments on the taxpayers involved on this basis, the Minister said, and a number of those taxpayers appealed the Revenue assessments to the Appeal Commissioners.
One of the appeals was heard before an Appeal Commissioner last year and the Commissioner determined that the transfer was chargeable to income tax.
The appellant subsequently sought a rehearing of the appeal before the Circuit Court but the court also determined that the transfer was chargeable to income tax.
Minister Donohoe said: “The appellant in the aforementioned case has requested a case stated to the High Court.”
