Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

93. To ask the Minister for Finance the number of persons set to face interest and penalties from the Revenue Commissioners as a result of the Circuit Court's decision that the tax avoidance scheme involving the disposal of inter-company shares was illegitimate; the expected value of the interest and penalties; the timeframe for the receipt of such interest and penalties; and if he will make a statement on the matter. [30692/17]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I assume that the Deputy is referring to a recent Circuit Court decision regarding the tax treatment of the transfer of share rights from a company to its shareholders.

In 2011, Revenue’s Large Cases Division identified a number of instances where taxpayers had structured their tax affairs in such a way that they had extracted large amounts of cash from profitable trading companies without paying any tax.  This tax-free extraction of cash was enabled primarily by the transfer of valuable rights attaching to shares owned by a company to shares owned by its members.  Revenue identified over 120 individuals who had extracted cash in this way.

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 (“the TCA”).  Revenue, accordingly, raised amended income tax assessments on the taxpayers involved on this basis.  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.  The Appeal Commissioner determined that the transfer was chargeable to income tax as a distribution pursuant to section 130(3)(a) of the TCA.  The appellant subsequently sought a rehearing of the appeal before the Circuit Court.  The Circuit Court recently reheard the appeal and also determined that the transfer was chargeable to income tax as a distribution pursuant to section 130(3)(a) of the TCA.  While the Circuit Court decision is not publicly available, the decision of the Appeal Commissioner is available online at www.taxappeals.ie under reference number 10TACD2016.  The appellant in the aforementioned case has requested a case stated to the High Court.

Since 2014, a number of taxpayers involved have come forward to Revenue in order to settle their cases.  The yield in those cases, comprising tax, interest and penalties, amounted to €11.8 million.  A number of other taxpayers 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.

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.  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.