The High Court has ruled that hotel owner Louis Fitzgerald was liable to the domicile levy for 2010 and 2011, despite capital allowances and trading losses that reduced his income tax liability and a Universal Social Charge (USC) payment of more than €200,000 in 2011.
Mr Justice Twomey delivered the judgment on July 9, 2021, answering six questions referred by a Tax Appeals Commissioner in a case stated. The court held that losses claimed under section 381 of the Taxes Consolidation Act 1997 were deductions in computing total income. The legislation defining “world-wide income” required those deductions to be disregarded when assessing whether the €1 million threshold was met.
Fitzgerald, owner of the Louis Fitzgerald Hotel at Newlands Cross, Dublin, had capital expenditure or allowances of €25 million in 2010 and €14 million in 2011. The judgment says he used capital allowances and trading losses to offset income from other sources, including shareholder, rental, dividend and interest income. He received tax repayments of €361,346 for 2010 and €919,557 for 2011. Excluding USC, he paid no income tax in either year, according to the judgment.
Fitzgerald argued that the allowances reduced the income used to calculate the worldwide-income threshold. Revenue argued they should be ignored. The court accepted Revenue’s interpretation, relying on section 381(5), which says the losses are treated as deductions made in computing total income. It also said that interpretation was consistent with the levy’s apparent purpose of preventing wealthy individuals from using tax shelters to reduce their income tax bill and avoid the levy.
The court separately rejected Fitzgerald’s argument that his 2011 USC payment counted towards the €200,000 income-tax threshold. It said the legislation treated USC as distinct from income tax: USC is charged outside the tax schedules, may be stated alongside income tax, and is payable in addition to income tax.
The domicile levy applies, among other conditions, where worldwide income exceeds €1 million, Irish property is worth more than €5 million, and income-tax liability is below €200,000. The judgment records the court’s conclusion that Fitzgerald’s worldwide income exceeded the threshold and his USC did not exempt him from the levy.
The court answered all six questions in the case stated in the negative, meaning the Commissioner was not incorrect in law on the issues referred. It did not set out a final order on outstanding matters. Instead, it asked the parties to try to agree those matters; if needed, the case was to be listed for mention one week after judgment at 10.45am.