By Gordon Deegan

A farmer and company shareholder has lost a €351,545 capital gains tax (CGT) battle with the Revenue Commissioners.

This follows the Tax Appeals Commission (TAC) ruling that while a share-for-share exchange at the centre of the tax dispute was effected for bona fide commercial reasons, it constituted an arrangement of which the main purpose, or one of the main purposes, was the avoidance of liability to tax. 

In finding against the farmer and company shareholder, TAC commissioner, Simon Noone has upheld a Revenue assessment for the €351,545 which arose on foot of a share-for-share exchange, and subsequent sale of shares.

The farmer had claimed relief from CGT and Revenue Commissioners raised the amended assessment on the basis that the exchange was not carried out for bona fide commercial reasons but was part of a scheme or arrangement of which the main purpose was avoidance of liability to tax. 

In his ruling, Simon Noone did find that the transaction was effected for bona fide commercial reasons.

Noone said that he accepted the farmer's evidence that he was motivated by a desire to ensure that he did not lose his farm and house.

The TAC commissioner said that he found it credible that the transfer of his shares to the holding company formed part of his strategy to protect his home and farm from potential losses on his investments in the future.

However, Simon Noone found that the main purpose, or at least one of the main purposes, of the share-for-share exchange was the avoidance of liability to tax from the transfer and subsequent sale of the shares.

The commissioner stated that there was evidence to suggest that the farmer had sought to avoid tax on other transactions. 

On behalf of the farmer and company shareholder, his senior counsel contended that the amended assessment raised by Revenue was incorrect, and furthermore was excessive and should be reduced to nil. 

It was further submitted by the farmer's barrister that the share-for-share exchange was made for bona fide commercial reasons and in particular was made in the context of his ongoing attempt to consolidate various assets and investments in one single holding vehicle and to facilitate succession planning.

The barrister contended that it was not sufficient for Revenue Commissioners to conjure up a fog of insinuation and conjecture, and contend that it outweighed the direct evidence given by the farmer and the other witnesses called on his behalf.

The TAC has been requested to state and sign a case for the opinion of the High Court in respect of the determination.