Boom means huge value of Haughey assets easily covers tax bill

Cynics who have watched the handling by Charles Haughey of his assets over the years have concluded that his motivation has been to put his wealth beyond the reach of the Revenue.

The theory went that, by transferring his assets to his children, he put them beyond any tax assessment which would arise if the Revenue ever discovered his substantial undeclared income.

Des Traynor, of course, was both the designer of Mr Haughey's tax strategies and in charge of the procurement of payments to the former Taoiseach. Mr Traynor was an accountant and tax expert and considered to be extremely clever in relation to such matters.

However, the settlement with Mr Haughey announced this week by the Revenue indicates that some of these transferred assets are to be used to fund his £1 million gift tax bill.

Ironically perhaps, the explosion in property prices, boosted by the economic boom - which Mr Haughey would say resulted from the policies of his last two governments - means the value of his family's assets is now such that it far exceeds his likely tax liabilities.

Selling just a small percentage of these assets should suffice to pay off the tax bills arising from payments received by Mr Haughey in the 1980s and early 1990s.

The assets themselves were mostly acquired during the 1970s, and the means by which they were acquired would seem to be outside the terms of reference of the Moriarty tribunal. There is no indication that the Revenue is conducting an investigation into the acquisition of the assets.

The 250 acres in the Abbeville estate, bought in 1969, are serviced as a result of a controversial sewerage scheme some years ago. But they are still zoned agricultural. The land could be worth up to £250,000 per acre, or £62.5 million in total, if rezoned. Even with its present status, the land is likely to be worth £50,000 an acre, or £12.5 million in total.

The bulk of the land was transferred by Mr Haughey and his wife, Maureen, to their four children in 1990. Mr and Mrs Haughey still own Abbeville House and, it is understood, about 30 of the surrounding acres.

The estate and stud farm are still run by the family and, along with Mr Haughey's State pension of around £40,000 a year, provide Mr and Mrs Haughey with a substantial income.

Mr Haughey's financial affairs have been extensively documented by the Moriarty tribunal. An accountant, Kieran Ryan, gave evidence last year about Larchfield Securities, an unlimited company owned by Mr Haughey's four children.

The company was incorporated in November 1973 and owns the yacht, Celtic Mist; shares in Celtic Helicopters; the island of Innishvickillane, Co Kerry; land and a house in Lislarry, Co Sligo; and land and a house at Bally duboy, Kilmuckridge, Co Wexford.

Mr Ryan said the company had no income of its own up to 1996 and many of its assets were entered in the company's accounts as "by way of gift" from Mr Haughey. Assets acquired since 1982, being additional lands at Ballyduboy, Celtic Mist including refurbishment costs, and shares in Celtic Helicopters, "are regarded as assets to the company with a matching liability to Charles J. Haughey".

The Lislarry house, a modest one on 13 acres, some of which flood at high tide, is up for sale. The first income earned by Larchfield came from the letting of the Kilmuckridge property in 1996.

Celtic Mist and Innishvickillane have been used regularly over the years by Mr Haughey, but seemingly never belonged to him. He many never have had to explain to the Revenue how he got them.

Larchfield Securities had no income until 1996. How the Revenue treated these matters is expected to be the subject of public hearings of the Moriarty tribunal in the coming months.

This week's £1 million settlement with the Revenue involves no acceptance of any offence by Mr Haughey, a fact which may be of importance in relation to his overall handling of his assets.

The Revenue, if trying to collect taxes, can seize assets recently given as gifts to the children of the person against whom the assessment has been raised. If the transfer of the assets occurred more than six years earlier, the assets are no longer within the Revenue's reach.

The only way for the Revenue to breach this is if it can argue successfully that the assets were transferred specifically to put them beyond the Revenue's reach. To prove such an allegation would be difficult, especially if the person in question has never been found guilty of a tax offence.

Assets worth more than £1 million will have to be sold to fund Mr Haughey's tax bill. Assets which have accumulated value incur capital gains tax when they are sold. The amount taxed is the difference, if any exists, between the profit made, over and above an index used by the Revenue to account for intervening inflation. Capital gains tax was reduced from 40 per cent to 20 per cent by the Government last year.

Only a person's home and one acre of attached land may be sold without incurring capital gains tax, and it is understood there is no question of Mr Haughey selling his home. So to pay a tax bill of £1 million through the sale of assets, Mr Haughey will have to sell assets worth £1.25 million.

Whether the sale of any assets belonging to Larchfield or his children results in a fresh gift tax bill is another matter Mr Haughey will have to address.

The evidence to date from the Moriarty tribunal indicates payments of about £1.5 million which may have future gift tax implications for Mr Haughey. Whatever tax bills may lie ahead, however, the family assets would seem more than sufficient to cover them.