The High Court has upheld the Tax Appeals Commissioner’s decision to disallow a €220,000 expense deduction claimed by solicitor Siobhan Fahy, finding no error of law in the Commissioner’s determination.
Mr Justice Oisín Quinn delivered the judgment on 14 December 2023 in an appeal by way of Case Stated. The case asked the court to answer three legal questions arising from the Commissioner’s determination of 22 August 2022. The court answered “No” to each.
Fahy, a practising solicitor and sole trader, claimed the €220,000 as an expense for services she said were provided by MLG Legal Services Ireland Ltd, a company of which she was a director and 99% shareholder. Revenue disallowed the deduction in an amended assessment for the 2014 tax year. The assessment was for €112,458.68; the Commissioner later recorded the amount as €112,455 and determined that it would stand because Fahy had not discharged the burden of proof on her appeal.
The Commissioner found that Fahy’s solicitor practice gained no identifiable benefit, resource or efficiency from the company’s services and continued operating in the same way. The Commissioner also found, based on Fahy’s evidence, that the payment was motivated by her wish to provide for and improve her pension.
Fahy argued that the Commissioner should not have considered her oral evidence because Revenue had not considered it when making the assessment. The High Court rejected that interpretation of section 949AG of the Taxes Consolidation Act 1997, holding that the Commissioner could consider matters Revenue might have taken into account. It also found evidence supporting the conclusion that the expense was not incurred wholly and exclusively for the purposes of Fahy’s trade, as required for a deduction under section 81(2).
The court also rejected Fahy’s argument that the Commissioner should have reduced the assessment to nil. It said the Case Stated appeal required an error of law and was not an opportunity simply to reargue the points made before the Commissioner.
A separate question concerned Fahy’s challenge to the validity of the amended assessment. Revenue accepted that the notice referred to an incorrect statutory provision, explaining that an incorrect template had been used. The High Court held that the Commissioner’s jurisdiction did not extend to deciding this broader validity challenge. It said the statutory power to declare an assessment void applied to specified time-limit grounds, which were not relied on in this case; a broader validity challenge was for the High Court.
The judgment does not alter the assessment or the disallowance. The matter will be listed to deal with costs.