The Chartered Accountants Tax Case Digest this month considers an appeal on the scope of the jurisdiction of the Appeal Commissioners and the Circuit Court when hearing appeals against assessments to income tax under section 933 and 942(1) TCA 1997. The Appeal Court moved away from the decision of the High Court, which was cautious of the additional cost and stress a narrow interpretation of the powers of the Appeal Commissioners and the Circuit Court may place on the taxpayer. The Court of Appeal applied a strict statutory interpretation of the powers conferred by the TCA on the Appeal Commissioner, in an effort to avoid confusion and uncertainty.

Background

The initial appeal to the Tax Appeal Commissioners arose on foot of notices of assessment for the years 2000 to 2006 and a notice of amended assessment for 2007 to 2009 for a total income tax liability of €536,322. Following Revenue’s announcement of a voluntary disclosure initiative for persons holding untaxed funds in domestic deposit accounts in 2008, the taxpayer’s accountant submitted a notice of intention to make a disclosure. His solicitor then provided a cheque to Revenue for €12,500, indicating this to be the “maximum amount our client can raise” and requesting for the cheque to be returned where it is not accepted. Revenue cashed the cheque.

On initial appeal, the taxpayer argued that the liability reflected in the assessments was compromised by the agreement Revenue entered on cashing the cheque and/or Revenue were estopped (prevented from a right that contradicts what was previously said or agreed to by law) from enforcing the assessed liability.

The taxpayer took an appeal to the Appeal Commissioners, and then to the Circuit Court. The case then went before the High Court and was most recently heard in the Court of Appeal.

Appeal Commissioners

The Appeal Commissioner rejected Revenue’s argument that the jurisdiction of the Appeal Commissioners was limited to dealing with and considering ‘an assessment to tax’ and did not extend to addressing whether any underlying liabilities had been settled by agreement. However, the Appeal Commissioner determined that a settlement had not been agreed and that Revenue’s assessment was valid. The taxpayer appealed this decision to the Circuit Court, as he was entitled to under the legislation in 2013.

Circuit Court

The Circuit Court judge in the case stated decided that his “role was confined to determining the amount, if any, of tax which was due and owing...” and that the Appeal Commissioner had erred in finding that his jurisdiction extended to determining whether a settlement had been reached.

High Court

The main question of law presented for the opinion of the High Court was whether a Circuit Court judge, hearing an appeal from the Appeal Commissioner, has jurisdiction under section 942(3) of the Taxes Consolidation Act, 1997 (as amended), or pursuant to his inherent jurisdiction, to determine whether the parties to an appeal have entered into a settlement in respect of the liability at issue.

Justice Kean considered the provisions of section 934 TCA – “to abate; reduce; permit to stand; or increase any assessment that is the subject of an appeal” and whether that extended to the consideration of whether a prior settlement had been reached between the taxpayer and Revenue. Kean J, in finding that the Appeal Commissioners and the Circuit Court had jurisdiction to consider “a contract law claim that there exists prior accord or settlement”, considered neither to have jurisdiction to consider a claim for legitimate expectation or for promissory estoppel. In making his judgment, Kean J was cautious that “an artificially narrow construction of the powers and authority of those bodies…” would give rise to additional cost and stress to the taxpayer in appealing an assessment.

Revenue appealed the decision of the High Court, arguing that the function of the Appeal Commissioner is only ‘to determine the assessment’.

The Court of Appeal

In its analysis of the functions of the Appeal Commissioners under the TCA and the Circuit Court in hearing an appeal under section 942 TCA, the Court of Appeal ruled that their function is to determine if an assessment to tax is properly made, having regard to the charging provisions, and no more. Furthermore, the Appeal Commissioners is “concerned properly with the ‘amount or matter in’ the assessment or amended assessment and that the only ‘grounds’ of appeal envisaged are directed to ‘such matter’”.

The jurisdiction of the Appeal Commissioners was said to be in tax, not in contract. In addressing whether the Appeal Commissioners had the power to determine if a liability was settled, the Court of Appeal ruled that the jurisdiction of the Appeal Commissioners did not extend to the application of public law principles in determining whether an assessment should be abated. The requirement for the Appeal Commissioners to follow the principles of procedural fairness was said not to change their statutory remit.

Conclusion

The Court of Appeal found that the function of the Appeal Commissioners is to see if an assessment has been properly prepared based on the facts and law relevant to the statutory charge to tax, and that its jurisdiction does not extend to adjudicating on whether the amount under assessment had been compromised, or whether Revenue are precluded by legitimate expectation or estoppel from enforcing the liability under assessment, or on whether an assessment would be rendered invalid on judicial review at the High Court. Findings of fact and law incidental to their inquiry are permitted, but “A Judge of the Circuit Court, hearing an appeal from the Appeal Commissioner, does not have jurisdiction under s. 942(3) of the Taxes Consolidation Act, 1997 (as amended), or pursuant to his inherent jurisdiction, to determine whether the parties to an appeal have entered into a settlement in respect of the liability at issue in the said appeal.”

The full judgment in this case is available at:- https://www.courts.ie/acc/alfresco/011385db-40c6-4e8e-ab72-7b85b26c28b2/2021_IECA_18%20(Unapproved).pdf/pdf#view=fitH