A Rossaveal fisherman has lost a Court of Appeal challenge to a €130,000 Capital Gains Tax assessment arising from the €5 million sale of his fishing vessel Glór na dTonn and its associated capacity tonnage.
Sean Flaherty entered into a Memorandum of Agreement with Antarctic Polyvalent Fishing Company on 21 October 2015. The vessel carried 230 gross tonnes of associated fishing capacity. Several steps followed before the transaction was completed, including licensing and registration procedures involving the Department of Agriculture, Food and the Marine.
A fishing boat licence and registration in the purchaser’s name issued on 11 January 2016. Flaherty argued that this meant the disposal occurred in 2016, which would bring him within Entrepreneurial Relief introduced from 1 January that year.
Revenue disagreed. It assessed the disposal as having occurred when the sale agreement was signed in October 2015 and therefore denied the relief.
The Tax Appeals Commissioner upheld Revenue’s position and a subsequent case stated to the High Court was also decided against Flaherty. He appealed that decision to the Court of Appeal.
Ms Justice Máire Whelan, delivering the unanimous judgment, held that the October 2015 agreement created an immediately binding contract. The subsequent steps involving fishing entitlements, licences, registration and closing documents were obligations connected with completing the transaction. They did not amount to a condition preventing a contract from coming into existence in the first place.
That distinction was decisive under section 542 of the Taxes Consolidation Act 1997. Where an asset is disposed of under an unconditional contract, the legislation fixes the disposal date as the date the contract is made rather than the later date when ownership is formally transferred.
The court held that Flaherty had not proved the existence of any condition precedent postponing formation of the contract until 2016. His appeal was dismissed, leaving the €130,000 assessment in place. Revenue was presumptively entitled to its appeal costs, subject to further submissions.