This follows Commissioner Clare O’Driscoll at the Tax Appeals Commission (TAC) reducing a cumulative €4.48m CGT and income tax assessment issued by Revenue to the two appellants to nil.
Revenue had issued in 2012 a combined CGT and income tax assessment of €2.4m to each of the two appellants on the basis that the lands at the centre of the tax dispute had a value of €40m rather than €30m.
At hearing, Revenue made clear that it sought to recover monies under one tax heading only and the assessments for CGT and income tax were raised in the alternative.
The tax dispute between the chairman and MD of the construction and another major shareholder at the group with Revenue stemmed from two land purchases in 2007.
In January and March 2006, the group entered into conditional contracts for two adjoining tracts of agricultural land for a combined €23.1m.
The €23.1m value was on condition that the sites would be rezoned for residential use by the local c ouncil. t he rezoning took place in 2007 and the purchases were completed that year.
However, as part of a corporate restructure at the group, the contracts for the sites were subsequently re-assigned to the group chairman and the second appellant.
The €30.6m value on the land deal with the group in 2007 comprised the €23.1m paid to the original landowners and an uplift of €7.5m paid to the group chairman and second appellant by way of credit director’s loan accounts in the company and did not provide a cash benefit to the two.
The lands in question had extensive road frontage and were within easy walking distance of the town “and in an area that is improving rapidly”.
Revenue based its €40m valuation on a letter to the group directors by an expert who estimated the €40m valuation based on the lands achieving 10 residential units per acre.
However, the group chairman told the TAC hearing that the letter was misconceived in that it was highly unlikely that 10 units per acre would be achieved and that provision needed to be made for green areas and other, non-housing related development.
Ms O’Driscoll found as fact that the market value of the lands in July-August 2007 was €30m.
The two appellants each paid CGT on their 50pc share of the combined €7.5m uplift to Revenue in 2007.
Ms O’Driscoll dismissed Revenue’s claim that the correct CGT assessment on the two should be based on combined gains of €16.9m based on its €40m valuation.
Ms O’Driscoll also found that the credits of €3.75m applied to director loan accounts held by the chairman and the second appellant did not relate to their having or exercising profit with the company and were not subject to income tax. Any party dissatisfied with the determination has a right of appeal on a point of law only within 42 days.
