The High Court has left in place a 2% year-on-year mark-up used in assessing publican Frank Watkins’s tax liabilities, declining to send that issue back to the Circuit Court despite finding that the case stated did not show the factual basis for the 2% figure.
In a judgment delivered on 19 April 2016, Mr Justice Michael Moriarty answered “no” to four of five questions referred by the Circuit Court judge. The first question was moot and required no determination. The case concerned VAT assessments for 2003 to 2008 and income tax assessments for 2003 to 2006 arising from Watkins’s public house trade at The Fighting Cocks, Townsend Street, Birr, Co Offaly.
The Circuit Court had found that Watkins’s business records were deficient. Revenue’s assessment followed an audit prompted by a wholesaler audit that identified undeclared cash sales to customers, including Watkins. The dispute included Revenue’s mark-up calculations and Watkins’s claims that drinks cost less in the front bar than in the lounge and that off-licence sales were made at discounted prices.
The High Court upheld the legal approach that the taxpayer bore the burden of proving an assessment was wrong. It also found the Circuit Court judge had not misdirected himself in requiring Watkins to establish the claimed price difference and off-sales, including their amount.
On those factual issues, the High Court said there was evidence supporting the Circuit Court’s conclusions. The judge had found no independent evidence corroborating the alleged price difference and no reliable basis to quantify any reduced-price sales. On off-sales, the High Court noted evidence that Watkins had twice told Revenue during interview that there were none, and that the Circuit Court had allowed no further adjustment.
The court said it could not identify from the case stated the factual findings behind the Circuit Court judge’s choice of a 2% annual mark-up increase instead of Revenue’s 5% figure. It stressed that it could not reconstruct those findings by examining transcripts. However, it declined to remit the issue, saying it doubted a rehearing would materially change the 2% assessment, which had already reduced Revenue’s proposed increase.
The court ordered that the 2% assessment stand. On costs, it exceptionally limited Revenue to two-thirds of the costs of the case stated, to be agreed or taxed.