By Gordon Deegan
A farmer has won a €72,728 tax battle with the Revenue Commissioners in relation to a dispute over a €140,656 Department of Agriculture, Food and the Marine (DAFM) Single Payment Scheme (SPS) payment.
Revenue issued the farmer with the €72,728 tax demand after finding that it arose as a liability on the €140,656 payment because the farmer did not include in his own annual income tax returns to Revenue.
The farmer contended that the Revenue Commissioners were out of time to issue the amended €72,728 assessment under tax law which provides for a four-year time limit.
The farmer appealed the decision to the Tax Appeals Commission (TAC) and the TAC found in his favour.
Appeal Commissioner, Claire Millrine found that the Revenue Commissioners were incorrect to issue the demand for the €72,728 as it was outside of the time limits contained in the Tax Acts and directed that the €72,728 assessment be reduced to ‘nil’.
The commissioner stated that she was satisfied that the appellant’s income tax return for 2011 “was complete, accurate and truthful having regard to the facts of this particular appeal”.
In her findings, she also found that tax legislation provides that no additional tax shall be payable by a chargeable person after the end of the relevant four-year period.
She added that tax appeals commissioners have no authority or discretion to not apply the timelines.
Time limits
The Appeal Commissioner found that as Revenue had issued the demand out of the time limits laid down, the substantive issue on whether the SPS payment from the DAFM was taxable as income in the hands of the farmer or was instead taxable as income received by his farm firm, does not arise.
The farmer had argued that the €140,656 was taxable as income received for the company he formed and owned.
The TAC ruling revealed that the commission has been requested to state and sign a case for the opinion of the High Court in respect of the determination.
The farmer has a number of land interests and on May 30, 2011 incorporated his farming business into a company together with all asset transfers and herd number.
In October 2011, the €140,656 SPS payment from the DAFM was paid to the farmer’s bank account and then subsequently transferred to the bank account of the new company.
The farmer did not include the SPS payment in his income tax return for 2011 but the SPS payment was included in the corporation tax return for the year ended May 31, 2012 for the new farming enterprise.
Clerical issue
The farmer told the TAC hearing that it was a clerical issue that the payment was made to his account, as opposed to the bank account of his company, which had been provided to the DAFM.
In May 2012, the farmer applied to the DAFM to transfer the SPS entitlements to the farm firm as he had missed the previous ‘transfer window’ prior to the end of May 2011.
A witness for the farmer at the TAC stated that the farmer derived no benefit from the entitlements which were paid directly to the farm firm and utilised by his farm firm.
In 2014, Revenue told the farmer that it intended to carry out an audit into his tax affairs and the two sides liaised in relation to the tax treatment of the SPS payment until January 2017.
Revenue issued its €72,728 tax demand in April 2017.