A dispute between the Revenue Commissioners and the wife of Shane Ryan, son of Ryanair founder Tony Ryan, over whether the sale in 2003 of a "significant number" of her family's shareholding in Ryanair was liable for Irish capital gains tax (CGT) has come before the Commercial Court.
The Revenue Commissioners are disputing the claim by Lorraine Kinsella, wife of Shane Ryan, that the share disposal of October 2003 is not liable for Irish capital gains tax. The Revenue, Ms Kinsella said, was threatening to assess her for CGT in relation to the share disposal.
Ms Kinsella, an Irish citizen and company director with an address at Elm Place, London, who married Shane Ryan in July 2002, claims that the share disposal was not liable for CGT because at the time she was tax-resident in Italy.
The proceedings have been entered in the list of the Commercial Court, the Commercial Division of the High Court which deals with business disputes valued at more than €1 million. A full hearing of the case is expected to take place later this year.
In the action, Ms Kinsella claims that in 2002, prior to the share sale, KPMG had contacted the Revenue to get "confirmation" that the 1971 tax convention between Ireland and Italy for the avoidance of double taxation applied to Irish CGT. The Revenue, in a letter of September 12th 2002, had replied that it considered that Irish CGT was covered under the provisions of article 2 of the Ireland/Italy double taxation convention.
Ms Kinsella said she, her husband and their advisers proceeded to structure the proposed share disposal in reliance on the Revenue confirmation that the convention applied to Irish CGT. She established tax residency in Italy under Italian domestic law and established residency of Italy under the terms of the convention in June 2003.
Her brother and agent, Denis Kinsella, had also received telephone confirmation from the Revenue, on September 16th 2003, that the convention did apply to Irish CGT, she said.
Ms Kinsella claims that the Revenue had purported to withdraw, with retrospective effect, the "express confirmation" given to KPMG and her brother that the convention did apply to Irish CGT. In March 2006, the Revenue stated that, having considered legal advice, CGT was not a covered tax under the convention.
In her proceedings, Ms Kinsella argues that the convention does apply to Irish CGT. Alternatively, if it does not, she contends that she had a legitimate expectation, based on the contacts with the Revenue and under the taxpayers' charter of rights, that the convention did apply to CGT. It would be "unjust, unconscionable and inequitable" for the Revenue to change or resile from their stated position and now to contend that the convention does not apply to Irish CGT, she said.
In its defence, the Revenue denies the claims.
It denies that KPMG wrote to the Revenue in September 2002 seeking "confirmation" that, in the Revenue's opinion, the convention applied to Irish CGT. It pleads that KPMG wrote with a "general query" seeking the Revenue's opinion about whether the convention applied to Irish CGT.
The Revenue also denies that it provided such "confirmation" in its letter of September 12th 2002 and pleads that it rather provided an "opinion" on a general query. The Revenue also says that the KPMG letter was not written on behalf of Ms Kinsella and her husband.
The Revenue denies that the expression of an opinion by it precludes it from changing its view as to the correctness of a previously-stated view or opinion. It also denies that such an opinion legally binds the Revenue to apply the relevant legislation in accordance with that opinion, even where that opinion was incorrect and not in accordance with law.
The Revenue denies that Ms Kinsella established tax residency in Italy under Irish domestic law or that she established residency of Italy in June 2003 under the terms of the convention.
The Revenue has also stated that the issue of the application of the convention to the share disposal came to its attention as a result of an "expression of doubt" relating to that share disposal which had been entered on Ms Kinsella's 2003 tax return under the Taxes Consolidation Act 1997.
The matter had then been referred to a principal officer in the Revenue's direct taxes interpretation and international division who was dealing with a number of CGT avoidance cases involving the use of Irish double-taxation agreements "by high net worth individuals making disposal of valuable shares", the Revenue said.
That in turn led, the Revenue said, to its seeking legal advice about the coverage of Irish CGT under the Ireland/Italy tax convention.
