O’Brien faces scrutiny from Revenue over 1999/2000 tax

The ruling by the High Court in relation to Denis O’Brien means that the Revenue Commissioners can ask him questions about his affairs for the 1999/2000 tax year.

The inquiry by the Revenue into his affairs for that year was held up after Mr O’Brien objected to an inspector asking him questions about that tax year on the basis, it is understood, that the time within which that was permissible, had passed.

The inspector was interested in the exchange by O'Brien of his shares in Esat Telecom – owner of the mobile phone company Esat Digifone – in return for loans in a company called BT Hawthorn.

Mr O’Brien’s objected to being asked about the 1999/2000 year but an Appeals Commissioner found in favour of the Revenue.

The commissioner also found that it was reasonable for the inspector concerned to believe that the original return filed by O’Brien for the 1999/2000 tax year was insufficient.

Legal reasons

The ruling on Tuesday by the High Court arose from the fact that when the decision was appealed to the Circuit Court by O’Brien, the judge in that court refused to hear it for legal reasons. The ruling that the Circuit Court judge was correct, leaves it open to the tax inspector to continue with his work in relation to the 1999/2000 tax year. He might even raise an assessment.

However, it is already known from the case that came before Ms Justice Laffoy that it was in the 2000/2001 tax year that a capital gain arose from the sale by O’Brien of his Irish telecoms company, and Ms Justice Laffoy has already ruled that his tax residency in that year was Quinta de Lago, Almanscil, Portugal, and not Ireland.

Capital gains tax

That ruling saved O’Brien approximately €57 million in capital gains tax that he might otherwise have had to pay arising from the sale by him of Esat, owner of the State’s second mobile phone licence, to BT.

The Revenue sought to prove that in that year O’Brien’s home was on Raglan Road, Dublin, and that he was therefore tax resident here, but the judge ruled that the Dublin property, owned by a company belonging to O’Brien, was not a permanent home for the tax year 2000/2001 for the purposes of article 4.2 of the Ireland/Portugal Double Taxation Convention.

The High Court proceedings arose out of a decision by the Revenue appeals commissioner Ronan Kelly that Mr O'Brien's home was in Portugal, not Ireland, which meant he was not liable for capital gains tax of €56.8 million on €285 million he received for his shares in Esat when it was sold to British Telecom in 2000.

The inspector of taxes was unhappy with that decision and the appeals commissioner agreed to refer the matter to the High Court to determine whether he was wrong in law. Ms Justice Laffoy held that he was correct.