The High Court has upheld a tax ruling that a taxpayer could not deduct rent on his new home from rental income received from his former home, which he said he had left because of racial harassment. But it found that the tax commissioner had made errors of law in assessing an €84,903.76 ex gratia payment from the taxpayer’s former employer.
In a judgment delivered on 12 April 2024, Mr Justice Oisín Quinn answered three questions in a Case Stated appeal concerning a Tax Appeals Commissioner determination made on 7 March 2022. The High Court answered yes to whether the commissioner was right to refuse the rent deduction, and no to whether the commissioner correctly treated the ex gratia payment as connected with the termination of employment and found it ineligible for exemption under section 192A of the Taxes Consolidation Act 1997.
The taxpayer said he and his family had left their former home in 2014 after serious racial harassment, supported by Garda documentation. The judge said the circumstances were “very unsatisfactory”, but the rent on the taxpayer’s new home was a personal living cost, not a permitted deduction against taxable rent from the former property. He said the legislation did not allow that expense to be offset, and sympathy for the taxpayer’s situation could not change the statutory tax rules.
The second issue concerned an agreement made in March 2014 while the taxpayer was on sick leave and had a racial discrimination claim pending before the Equality Tribunal. The agreement provided for statutory redundancy of €4,416 and an ex gratia payment of €84,903.76, described in the agreement as a termination payment. It also required the Equality Tribunal claim to be withdrawn. The taxpayer argued the ex gratia sum settled that claim; Revenue treated it as a termination payment and applied tax reliefs, with about €21,872 deducted.
The judge said the commissioner had wrongly interpreted section 192A as requiring formal proceedings to have been issued. He also found that the commissioner had not properly considered the agreement’s background, including correspondence referring to settlement of the employment dispute and documents about the pending tribunal mediation. The agreement’s label was not decisive: the relevant question was the payment’s true substance and whether the statutory conditions for exemption were met.
The High Court did not itself determine that the payment qualified for exemption. It answered the third question against the commissioner’s conclusion that it did not, finding that the issue required examination of relevant documents, including material the former employer was required to retain and make available to Revenue. The judgment therefore resolved the legal questions in the Case Stated but did not make a final finding that the taxpayer was entitled to the exemption.