Supreme Court: Revenue was out of time to compel man to repay IR£24,000 tax relief from 1997

About this case:

• Judgment:
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In accordance with s. 811(7) of the TCA, Mr Droog appealed against the notice contending that it was out of time by reason of ss.924, 955 and 956 of the TCA.

The Appeal Commissioner decided to conduct an initial hearing to deal solely with the question of the time limit, and determined that the four-year time limit set out in ss.955 and 956 of the TCA applied to the formation of an Opinion under section 811 – therefore the Opinion in Mr Droog’s case was out of time.

Whilst the time limit is inoperative where the return of the taxpayer concerned is affected by fraud or neglect, Justice Clarke emphasised that there was no suggestion of fraud or neglect on the part of Mr Droog. Accordingly, the issue was whether, on a proper construction of the Taxes Acts as a whole, the formation of an Opinion under section 811 was caught by the general time limitations contained in ss. 955 and 956 of the TCA.

The High Court

In the High Court, it was noted that in Cronin (Inspector of Taxes) v. Cork and County Property Company Limited I.R. 559, it was held that a subsequent amendment can at best be neutral in the context of the interpretation of the relevant legislation in its pre-amendment form and cannot be used to construe the statute as it was before the amendment in question.

The fact that an express exclusion of the time limit in respect of section 811 had been introduced by the Finance Act 2008 could not affect one way or the other the question of whether, on a proper interpretation, the time limit applied prior to that amendment.

Ultimately the court held that “the wording of section 811 was not sufficient to give rise to a disapplication of the time bars stipulated in ss.955 and 956 for the purposes of section 811, and that the words ‘at any time‘ in s.811(4) did not have the effect of displacing the primacy given by s.950(2) to the provisions of Part 41”.

Supreme Court

Justice Clarke stated that the question for the Court to consider was whether “the use of the phrase ‘at any time’ in s.811(4) amounted to a sufficiently clear and express exclusion of the time limits set out in s.955 so as to disapply those time limits in the context of a section 811 Opinion”.

In his judgement, Justice Clarke stated that the only purpose of the raising of a section 811 Opinion was to “potentially give rise to a situation where a taxpayer’s affairs are re-opened and the taxpayer will become liable to pay more tax if the relevant Opinion becomes final and conclusive”.

Section 955 “expressly excludes any such payment outside the four year time limit”.

The raising of an Opinion whose only end can be to require the payment of additional tax in circumstances where such additional payment is prevented by the time limits contained in Part 41 was clearly impermissible.

To start a process that could have no lawful conclusion must be legally impermissible - the time limit provisions contained in Part 41 could not be dis-applied by sufficiently clear and unambiguous language in section 811.

Justice Clarke held that the trial judge was correct to conclude that the time limits contained in s.955 of the TCA applied in the case of section 811 and were not dis-applied by any sufficiently clear and unambiguous language in that section.

Where a tax payer has made a “full and true” disclosure of all relevant facts, the Oireachtas must have considered that it would have been significantly unfair to allow Revenue to reopen the amount of tax due after the relevant four year period.

Dismissing the Revenue’s appeal, Justice Clarke stated that this must itself be regarded as being legally impermissible.