The High Court has set aside a Tax Appeals Commission determination that granted group tax relief to three Irish companies in a dispute with the Revenue Commissioners.
In a judgment delivered on 2 October 2024, Mr Justice Brian O’Moore answered two questions in Revenue’s appeal by way of case stated. He held that Susquehanna International Holdings LLC (SIH LLC), the companies’ Delaware parent, was not a US resident within the meaning of the Ireland-US Double Taxation Agreement. He also held that the Appeal Commissioner erred in finding the companies were entitled to group relief under section 411 of the Taxes Consolidation Act 1997.
The dispute concerned losses that one group company sought to surrender for use by another. Revenue had refused relief, but the Appeal Commissioner ruled for the taxpayers. Revenue then appealed. It conceded in the High Court that SIH LLC was a “company” for the relevant purposes; the central issue was whether it was resident in the US under the treaty.
SIH LLC was treated as a disregarded entity under US federal tax law. Its income was taxed at the level of its ultimate owners, five US-resident individuals, rather than in the LLC’s own hands. The taxpayers argued that the LLC was nevertheless liable to tax in the US, or that treaty non-discrimination protections applied. Revenue argued that the entity itself was outside the US tax net.
Justice O’Moore concluded that Article 4 required liability to tax under US law, and that SIH LLC was not liable to tax on that basis. He considered the treaty’s aims, OECD commentaries and its protocol on fiscally transparent entities. Those materials supported his conclusion, he said, that the LLC was not a treaty resident. He also found that, for the group relief discrimination claim under Article 25(4), the taxpayers had to establish that SIH LLC was US-resident. The residence of its ultimate owners did not satisfy that requirement.
The court answered question (d) in the affirmative: the Appeal Commissioner erred in treating SIH LLC as a US resident under Article 4. It also answered question (h) in the affirmative, finding an error in the ruling that the companies were entitled to group relief. The determination in the taxpayers’ favour was set aside. The court did not decide the remaining questions in the case stated.
On costs, the judge gave a preliminary view that Revenue appeared entitled to its costs. Either party could notify the registrar by 5pm on 18 October 2024 if seeking a different or more extensive order; further directions could then follow.