Revenue Precedents

Whether a deduction due in respect of a provision for a loss on a court case? In principle there is no statutory rule against charging a provision for a liability which has not materialised at the accounts date, provided such a provision will result in the accounts providing a true and fair view of the profits of the period and the amount of the provision can be estimated with reasonable accuracy. Where the claim includes a claim for a return of fees already earned, this aspect should be dealt with in the same manner as the rest of the claim. IT972004A

Registration fees/licence renewal fees which are required by law to be paid by a trader or professional are deductible provided they are laid out wholly and exclusively for the purposes of the trade. IT891143

Are legal fees incurred in connection with the ownership of a business property deductible in arriving at trading profits? The allowability of legal expenditure will depend on whether it is attributable to Revenue or Capital. This matter has been considered in a number of tax cases and the main findings appear to be that legal expenses incurred in acquiring a capital asset are treated as capital expenditure, yet expenditure incurred in protecting the title to a capital asset, when it has been acquired, may be deductible revenue expenditure. The case of Southern v Borax Consolidated Ltd. 23 TC 597 is relevant. IT943501

If a trader, who offers a “free gift” to a customer who purchases certain items, entitled to a deduction for the cost of the “free gift” or is the cost disallowed under Section 840? e.g. a trader starts a sales promotion whereby the purchaser of a washing machine will receive a radio to the value of 20. It appears that in these circumstances the contract between the customer and the trader involves both the washing machine and the radio. In effect the radio is not a “free gift” and as such would not come within the provisions of Section 840. It is the Revenue view that the cost of each radio is allowable in computing the profits of the trade. IT943520

Professional fees incurred in connection with a tax appeal are not deductible. Normal recurring professional fees incurred in preparing accounts or agreeing liabilities are allowable. IT952564

Interest on a loan to finance the payment of income tax is not allowable. It is not wholly and exclusively laid out for the purposes of the trade. IT952561

Whether, in a trade or profession, interest paid on borrowings used to fund drawings is allowable? Where a capital account is in a debit position and the debit balance arises from an excess of drawings over profits available to fund those drawings, the interest portion of the bank borrowings used to fund the deficit is not allowable. IT962501

Can a partnership claim a deduction for rent paid in respect of premises which is owned by the individual partners in the firm? It appears that the lease involved between the partnership and the partners has no legal standing. The case of Rye-v-Rye 1962 A.C. 496 is relevant. The issue is currently the subject of an appeal, which has not yet been finalised. However, the foregoing continues to represent Revenue thinking in the issue. It is considered that the fact that partners may share partnership profits on a basis which differs from the basis on which that rent on the premises is paid to the various partners does not affect the issue. IT953545

Is the super levy penalty collected by Co-ops from farmers for exceeding their milk quota allowed as a charge against farming profits? It is accepted that payments by farmers under the European Communities (Milk Levy) Regulations, 1985 are an expense of the trade. IT903106

Taxpayer claiming relief for foreign exchange loss on five year loan obtained to purchase plant for use in the taxpayer's trade. The exchange losses arose in respect of the balance outstanding on the loan and were claimed as a deduction in calaulating the taxpayer's trading profit. The question at issue was whether the exchange losses were on capital account. This in turn depended on whether borrowings are a means of temporary and fluctuating accommodation. Effect of decision in Mutual Enterprises Ltd case. The Supreme Court decision in Mutual Enterprises held that the question of whether borrrowings are a means of temporary and fluctuating accommodation is a question of fact rather than law. Even though the Circuit Court judge in the particular circumstances of the case held that the borrowings were on revenue account, the dicta in the High Court indicate that the High Court judge would have attached significance to the fact that money was borrowed with the intention of purchasing a capital asset. Revenue's view is that borrowings to purchase a capital asset for use in a trade is indicative that the borrowings are on fixed capital account and that any exchange loss incurred in relation to the borrowings should not be deducted in arriving at the taxable profits of the trade. IT972000

Refunds of a percentage of fees paid by self employed practitioners to the Medical Protection Society are made by Health Boards. Tax relief on the gross fees is estimated by the boards when they are calculating the refunds. Do these refunds have to be taken into account when preparing accounts and on what amounts is tax relief due to the practitioners? Refunds of fees received must be taken into account. As a result tax relief will be due on the net amount paid in each case i.e. the gross payment made less the actual refund received. IT953548

Amateur sportsmen in receipt of payments from media are chargeable to tax and payment should be included in returns. IT892043

A deduction is not allowable in respect of “protection money”. IT972501

Whether insurance premiums and insurance claims paid by a compensation fund which is a trade protection association are allowable as deductions against income of the fund? Both insurance premiums and insurance claims are allowable deductions. IT972510

Whether unbilled disbursements on behalf of clients can be deducted in the period in which paid? Where there are unbilled disbursements, there is no known liability in the majority of cases. The presumption is that the disbursement will be billed to the client on whose behalf it was incurred. In so far as it cannot be so billed or the client refuses to pay it the amount can be written off at that stage. IT972004B