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Capital Acquisitions Tax Regarding CATA76 s39, 25 AC 2000 Background
The
Revenue Commissioners raised Gift Tax assessments under Section 39 of the
Capital Acquisitions Tax Act, 1976 (“the Act”) in respect of funds which
they identified as having been provided to an individual (“the Taxpayer”)
from the resources of one or more companies (the “payer companies”).
The payer companies were not incorporated in the State and the bank
accounts from which the funds were made available were situated outside this
jurisdiction. Revenue
Commissioners’ Arguments Legislation Section 8(1) of the Companies Act, 1963 (“the Companies Act”) - “Any act or thing done by a company which if the company had been empowered to do the same would have been lawfully and effectively done, shall, notwithstanding that the company had no power to do such act or thing, be effective in favour of any person relying on such act or thing, who is not shown to have been actually aware, at the time when he so relied thereon, that such act or thing was not within the powers of the company, but any director or officer of the company who was responsible for the doing by the company of such act or thing shall be liable to the company for any loss or damage suffered by the company in consequence thereof.” The Revenue Commissioners argued that: - the payments to the Taxpayer of funds which were identified in the report of a tribunal as being as the property of one or more companies in a group of companies (“the Group”), were gifts - the payments referred to above were: - made by an individual who was identified in the report of the tribunal and that that individual was the disponer as defined in Section 2 of the Act - effectively made by a company or companies based in the State -
in accordance with Section 8(1) of the Companies Act the payments to the
Taxpayer - were not within the powers of a company or companies - would have been lawfully and effectively made if the company or companies were empowered to make them - were effective in favour of the Taxpayer who was not shown to have been actually aware, at the time such payments were made, that such acts were not within the powers of the company or companies - were valid gifts and constituted dispositions by a director (who was the “disponer” in accordance with Section 2 of the Act) to the Taxpayer -
the disponer was domiciled in the State at the times of the dispositions. - the onus rested with the Taxpayer to establish that the assessments were in fact incorrect.
Taxpayer’s
Arguments
Legislation Section 34 of the Act - “.. a disposition made by a company shall be deemed to be a...disposition...paid or made...by the beneficial owners of the shares in the company...”.
The Taxpayer argued that: - the burden of proof of taxability is on the State (AG v Seccombe [1990] 2 KB 688 and McGrath v MacDermott 3 ITR 683 refers) notwithstanding that the burden of proof in relation to the assessments rests with the Taxpayer, - the Revenue Commissioners had erred in identifying the disponer. The report of the tribunal referred to payments made by a named individual but the tribunal was not concerned with taxation and did not make any findings in relation to the tax consequences of the issues which it addressed. - the tribunal report found that the funds used for the payments were the property of one or more companies in the Group. None of the payer companies were incorporated in the State. The Companies Act applies only to companies incorporated in the State. Consequently Section 8(1) of the Companies Act could not be applied to the payer companies. - the funds used for the payments were provided by companies and therefore the provisions of Section 34 of the Act applied. Thus it was necessary to identify the companies and their beneficial shareholders. The Taxpayer was unable to identify the shareholders in the payer companies and asserted that the Revenue should do so. - in order to determine whether a taxable gift, as defined in Section 6(1) and referred to in Section 4 of the Act, arises the identity and domicile of the disponer must be determined. - the identity of a disponer determined the applicable threshold amount in accordance with Part 1 of the Second Schedule to the Act - it was necessary to identify the disponer in order to establish whether a person who was beneficially entitled in possession to a benefit under a disposition was deemed to take a gift in accordance with Section 5(1) of the Act or deemed to take an inheritance in accordance with Section 11(1) of the Act. - it is necessary to know the number of disponers to establish the donee’s entitlement to small gifts exemption described in Section 53 of the Act.
Arguments were also made concerning, inter alia, constructive trusts, the Statue of Limitations, 1957, “valuation date” (Section 21 of the Act) and “beneficially entitled in possession” (Sections 5 and 11 of the Act). Appeal Commissioner’s Decision The Appeal Commissioner - noted that a charge to gift tax required, inter alia, a taxable gift as defined in Section 6 of the Act - accepted the submission by the Taxpayer that it was necessary to determine the identity and the domicile of disponers in order to establish whether a taxable gift had been made - accepted the submissions by the Taxpayer that it was necessary to establish the identity of disponers in order to establish: - the class threshold amount to which a donee was entitled in accordance with the Second Schedule to the Act, and, - whether a person who was beneficially entitled in possession to a benefit under a disposition was deemed to take a gift in accordance with Section 5(1) of the Act or deemed to take an inheritance in accordance with Section 11(1) of the Act - accepted the submission by the Taxpayer that it was necessary to determine the number of disponers in order to establish the donee’s entitlement to the exemption described in Section 53 - rejected the argument advanced by Revenue that the report of the tribunal identified the disponer for the purposes of the Act and accepted the argument by the Taxpayer that while the report of the tribunal referred to payments made by a named individual the tribunal was not concerned with taxation and did not make any findings in relation to the tax consequences of the issues which it addressed - rejected the argument advanced by Revenue that the disponer was identifiable through operation of Section 8(1) of the Companies Act. The payer companies identified in the report were not incorporated in the State. The Companies Act applied only to companies incorporated in the State. Consequently Section 8(1) of the Companies Act could not be applied to the payer companies. - noted that as the payments were identified in the report of the tribunal aas having been made from the funds of one or more companies it was necessary to identify the beneficial owners of shares in the payer companies in accordance with Section 34 of the Act - noted that no disponer or disponers were identifiable from the information made available - determined that, in the absence of a reliably identified disponer or disponers, the assessments under appeal should be reduced to nil. - considered that it was not necessary for him to advert to the other issues raised by the Taxpayer given his determination above.
Dissatisfaction
was expressed by the Revenue Commissioners. |
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Copyright © 2000 Office of the Appeal Commissioners
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