The High Court has overturned a Tax Appeals Commission finding which reduced additional corporation tax assessments against Chili Bagan Restaurant Limited to nil.
Mr Justice Dignam ruled on June 17 that the Tax Appeals Commissioner made legal errors when finding that the company had €378,293 in unused corporation tax losses available to offset additional taxable income assessed by Revenue.
Revenue had selected Chili Bagan for audit in November 2017. The audit covered VAT and corporation tax and led to corporation tax assessments of €8,210 for the year ending October 2016 and €21,739 for the following financial year, including 10% surcharges. Revenue also assessed additional sales of €59,712 and €158,104 for those periods.
Chili Bagan appealed. Its case focused on arguments that Revenue’s underlying figures were unrealistic, that accounting discrepancies arose from issues including a change in its electronic point-of-sale system, and that the assessments were exaggerated.
The Tax Appeals Commissioner later found that earlier trading losses could eliminate the corporation tax liability. However, the High Court found that unused losses had not been raised by Chili Bagan as a ground of appeal.
The issue emerged when the Commissioner asked Revenue about losses during the appeal hearing. Chili Bagan subsequently provided corporation tax returns and accounts. Revenue was then told it did not need to provide its own information and was not given an opportunity to address the documents before the Commissioner relied on them.
Revenue maintained that only €168,084 of losses had been accepted and that those losses had already been used. The High Court did not decide whether Revenue’s figures were correct.
Instead, it held that procedural fairness required Revenue to be allowed to address the new issue and evidence. It also confirmed that the burden of proving a tax assessment wrong rested on Chili Bagan. All three legal questions in the case stated were answered in Revenue’s favour, and the matter is to return to the Tax Appeals Commission.