About this case:

• Citation:
  [2025] IEHC 182
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Brian Cregan

Delivering judgment for the High Court, Mr Justice Brian Cregan opined “it appears as if Mr Clarke was trying to ride two horses simultaneously. On the one hand, he was continuing to trade the quarry business in his own name and selling stone to Galway County Council, issuing invoices in his own name and using his own VAT number. On the other hand, Mr Clarke was purporting to transfer the business of the quarry to the company for some purported retirement tax plans and to use the company for sales to other construction firms representing 20 per cent of the business. However it is clear that Mr Clarke did not complete a proper valid transfer of the business from himself to the company.”

Background

The appellant operated inter alia a quarry in the west of Ireland as a sole trader until 2007, when he incorporated a limited company called Coiléar Rosmuc Teoranta (CRT) for the purposes of operating the quarry business.

The appellant’s accountants prepared the annual accounts and returns to the Companies Registration Office for CRT, and were the same firm who completed the appellant’s personal tax returns.

In 2013, the appellant and CRT were advised of a revenue audit, as a result of which amended assessments to income tax were raised for the periods ending 31 December 2007, 31 December 2008 and 31 December 2009.

The assessments were raised on the basis that the quarry income was that of the appellant personally and not that of CRT, as the quarry itself, the quarry licence, the machinery, vehicles and the business operated thereon were never transferred to CRT and most of the invoices were issued by the appellant personally. The appellant appealed the amended assessments to the Tax Appeals Commission (TAC).

The Tax Appeals Commission

The appeal before the TAC proceeded by way of oral hearing on 14 Aril 2023 in the appellant’s absence. It was found that the appellant had not transferred the business of the quarry to CRT in 2007 and that the appellant was, therefore, personally liable to income tax on the quarry trade.

The appellant stated a case to the High Court concerning whether, having regard to the evidence adduced before her, the appeal commissioner erred in law in concluding that the quarry business was not transferred from the appellant to CRT with effect from 28 February 2007, such that it was the appellant who was carrying out the quarry trade and not the company.

The parties disagreed on two issues — whether the evidence established that the appellant was acting in the capacity of undisclosed agent for the quarry business in relation to the company and whether there was, as found by the commissioner, no documentary evidence of the transfer of the quarry business.

The High Court 

Mr Justice Cregan noted the jurisdiction of the High Court in cases stated as set out by the Supreme Court in Mara (Inspector of Taxes) v. Hummingbird Limited [1982] ILRM 421, explaining that an appeal by way of case stated is not a re-hearing of the tax appeal, but an inquiry into whether the appeal commissioner made findings of fact without evidence to support them, drew inferences or conclusions that no reasonable appeal commissioner could draw or took an incorrect view of the law.

The judge considered three documents which the appellant asserted to be evidence of a transfer of the quarry business to CRT: a notice of an EGM dated 28 February, the wording of an ordinary resolution passed by the EGM and the minutes of the EGM showing that a resolution had been passed.

Having considered the documents, the court did not agree with the appellant that they constituted evidence of a transfer of the quarry business to CRT, in circumstances where the resolution and minutes simply demonstrated that the company was authorised to acquire the goodwill of the business and where same were not followed by a deed of sale and/or purchase and other transfer documents.

The court pointed out that the resolution was merely “a conditional approval by the shareholders authorising the Board of the company to acquire the company — on such terms and conditions as the Board might think fit”.

As to the appellant’s argument that his income tax returns, which showed that no income was received in relation to the quarry, evidenced a transfer of the quarry business to CRT, the High Court outlined that this argument was circular where the position of Revenue was that he should have returned his quarry income in his personal tax returns because he had not transferred the quarry business to the company.

Mr Justice Cregan was similarly unconvinced by CRT’s abridged accounts for the years ending 31 March 2007, 31 March 2008, 31 March 2009 and 31 March 2010 which allegedly demonstrated that the company was trading in the quarry business.  

In particular, the judge considered that “80 per cent of the stone extracted from the quarry was sold to Galway County Council. It is also clear that Galway County Council insisted that all invoices had to be sent to them in the name of Mr Clarke because the licence was in his name. It is clear therefore that Mr Clarke in selling the stone from the quarry to Galway County Council based on these invoices and his VAT number, was personally trading with Galway County Council.”

The court also had regard to the fact that the appellant lodged monies received from Galway County Council into his personal account and over time, made some payments from his personal account to the company account.

In those circumstances, the court was satisfied that “the fact that there was activity in the company’s account under creditors, and movements in its profit and loss account and payment of VAT and Corporation Tax are certainly evidence that the directors of the company might have thought that the company was trading in respect of the quarry business but, in the absence of a proper transfer, that was a misconception on the part of the directors and the company”.

Mr Justice Cregan also considered inter alia the quarry licence remaining in the appellant’s name, the absence of a conveyance or transfer to CRT of the land on which the quarry was situated or the quarry itself, the leasing agreements for plant and machinery remaining in the appellant’s name and the lack of evidence of payment by CRT for the quarry as evidencing the fact that the quarry business did not transfer to CRT.

As to the appellant’s contention that in light of the documentary and other evidence, the burden of proof shifted to the respondent to demonstrate that the transfer did not take place, the judge reasoned that the evidence established that no transfer took place and so the burden of proof remained with the appellant.

Conclusion

Accordingly, the High Court found that the TAC did not err in law in concluding that the quarry business was not transferred from the appellant to CRT with effect from 28 February 2007.

Clarke v The Revenue Commissioners [2025] IEHC 182