High Court takes glimpse into murky world of tax avoidance
The four businessmen challenging the ruling are arguing that the Revenue did not inform them immediately of their view in relation to the scheme, as required to under the act, but rather delayed notifying them of the decision for a lengthy period. The Revenue is contesting the claim.
The Revenue first became concerned about the transactions in 2009 when the individuals made tax returns showing very substantial gains but claiming losses for tax purposes.
According to Revenue official Breda Ruddle, who led the investigation into the scheme, the effort to understand what was going on required the engagement of experts and consultations with the National Asset Management Agency and people from the Smurfit School of Business.
“We never got to the point where we fully understood the transactions,” she said.
However, on July 22nd, 2011, John Punch was told of that the Revenue consider the scheme to fall foul of Section 811. On July 27th, Martin Punch was told. On August 16th Derek Whelan was told and on August 24th Ronan McNamee was told.
While most of the details contained in the Revenue’s reports on the four individuals were not declared orally in court (the details were in documents that formed part of the plaintiffs’ case), it was disclosed that the tax advantage that was being refused to Mr McNamee was €5.1 million and that the capital gains tax due from him in the year in question was €11.2 million.
Six of the 26 people known by the Revenue to have been involved in Schroder schemes used the tax treatment of Government gilts as part of their strategy, while the rest of the people involved used contracts for difference.
Concern about the scheme led to changes in the law introduced in the 2010 Finance Act at the behest of the Revenue.
The court heard that the same tax agent was used for the people using the gilt purchases as part of their tax avoidance strategy and that all 26 people provided identical letters from the same solicitor in correspondence with the Revenue.
The court heard that Mr Punch’s tax agent in his dealings with the Revenue was Twomey Moran. The tax consultancy firm is based on Barrow Street, Dublin 4.
The four men have taken Judicial Review proceedings of the Revenue’s decision.
The men have more scope to appeal the Revenue’s refusal of the tax scheme in the High Court than by way of the Appeal Commissioners.
However, as a consequence the case is being heard in open court rather than in in camera proceedings.
Neither side has to date given copies of any of the documents involved in the case to reporters, as is the norm with most cases in the High Court.
This was brought to the attention of the court registrar by The Irish Times during a break for lunch on Wednesday.
When the hearing resumed Mr Justice McGovern asked the parties involved to attempt to facilitate the media in its coverage of the case while bearing in mind any sensitivities that might be involved.
As of yesterday, no affidavits or other documents referred to and opened in court, had been given to the media.