The High Court has ordered Eileen Foley to pay a €102,460 penalty after finding that she negligently submitted an incorrect capital gains tax return for 2003 following the sale of Harvey’s Bar in Kinsale, Co Cork.
Mr Justice Michael Peart ruled on 22 November 2011 that the civil standard of proof, the balance of probabilities, applied to Revenue’s application under the Taxes Consolidation Act 1997. He determined that Foley was liable to a penalty and ordered its recovery. The court was deciding penalty liability and recovery; the judgment records that the underlying tax assessment had already become final after earlier appeals.
The judgment says the sale contract was made in October 2003, and the premises were sold and the purchase money paid in December that year. Capital gains tax was due by 31 January 2004. Foley’s 2003 tax return, filed in October 2004, left the capital gains section blank. After Revenue requested a completed return, she said the sale had taken place in March 2004 because the contract was conditional, and submitted a calculation that included deductions for refurbishment, auctioneer’s fees and legal fees.
Revenue disputed the timing and deductions. Following assessments and appeals, the Circuit Court rejected Foley’s claims that she could deduct half the property’s deemed 1999 market value and €25,400 in auctioneer’s fees. No further appeal was filed. The judgment says the resulting assessment, which put the taxable gain at €557,258, was final and conclusive.
Foley said she relied on her then husband, a tax adviser, to handle her tax affairs. He maintained that a licensing issue meant the sale was conditional until March 2004. He also accepted that refurbishment costs were not deductible. Revenue’s evidence challenged the claimed deductions and said the couple had not explained how some payments were calculated.
The judge rejected the account that the contract remained conditional, finding that the sale was completed in 2003. He concluded that omitting it from the return was at least negligent, and that the unsupported deductions were also negligent. He said a taxpayer relying on others must make reasonable inquiries to check that information in a return is complete and accurate. The court made the three orders sought: liability for a penalty, the penalty amount of €102,460, and recovery of that amount by Revenue.