The High Court has sent a tax appeal back to the Circuit Court for a fresh hearing after ruling that tax appeal bodies can consider whether Revenue and a taxpayer reached a prior settlement covering the liabilities under appeal.
Mr Justice Keane delivered the judgment on 31 January 2018 in a case stated by Circuit Court Judge David Riordan at the request of Kenny Lee. The dispute concerns income tax assessments issued by the Revenue Commissioners. The High Court did not decide whether a settlement existed or whether the assessments should be reduced.
Lee argued that Revenue had accepted a €12,500 payment in full and final settlement of tax liabilities. His solicitor’s letter of 9 January 2009 offered the sum for taxes and duties up to the end of 2007. Revenue acknowledged receipt on 13 January and later encashed the cheque. In July 2009, however, Revenue said the money had not been accepted on the terms offered and proposed treating it as a payment on account of any final liability.
Revenue subsequently issued assessments for several years. The assessments for 2003 to 2006 and an amended assessment for 2007 asserted a combined income tax liability of €392,611, without credit for the €12,500 payment. Lee appealed, disputing estimated miscellaneous income and maintaining that the earlier payment had settled the relevant liabilities.
An Appeal Commissioner rejected the settlement argument and confirmed the assessments. On a rehearing, the Circuit Court ruled that it lacked jurisdiction to decide whether a settlement had been reached or whether Revenue was prevented from denying one. It then ordered that the assessments stand. Lee challenged that ruling by case stated.
The High Court held that the Appeal Commissioners and the Circuit Court may consider a contract-law claim that a prior accord or settlement requires an assessment to be reduced or abated. The court said such questions can arise incidentally when deciding the amount of tax due. It distinguished those claims from legitimate expectation and promissory estoppel, which it said fall outside the tax appeal bodies’ jurisdiction and must be brought in separate proceedings before an appropriate court.
The court did not answer the other questions raised in the case stated. It said it would be inappropriate to decide whether the assessments were correct before the Circuit Court considered the settlement issue. The matter was remitted to that court for rehearing in light of the High Court’s opinion. Whether any accord or settlement exists remains for the Circuit Court to determine on the evidence properly before it.