The Gazette 1986

GAZETTE

sep

BER 1986

of the taxpayer, and instead had regard to what he

described as the reality of the situation. In this case, the

taxpayer ceased to practise as a barrister on his

appointment to the High Court bench in January 1973.

In February 1973, a company called SG Ltd. was

incorporated, the three issued shares of which were held

by members of the taxpayer's family. Following his

appointment, the taxpayer wrote to Solicitors for whom

he had done work stating that he did not wish to receive

any fees but if they wanted to, the Solicitors could pay

the company instead. The fees would not have been

liable to tax in the hands of the company. The arrange-

ment was designed to fall outside the scope of section 20,

Finance Act, 1970, which imposed a charge to income

tax on profits "received" by a self-employed person

who had ceased to practise which would otherwise have

been non-taxable capital. The question for decision was,

therefore, whether the fees paid to SG Ltd had been

"received" by the taxpayer within Section 20.

Barrington J. stated the principles of construction of

tax statutes as follows:

"The principles of legal interpretation to be

applied to the construction of Revenue Statutes

are well established. It is a general principle that to

be liable to tax the citizen must come clearly

within the words of the charge to tax. On the other

hand, once within the scope and terms of the

charge to tax, he cannot escape unless clearly

within the terms of an exemption. There is no rule

of law against the citizen making genuine and

lawful arrangements of his affairs by which the

incidence of tax on his property is lessened. In the

construction of a Taxing Act the Court has

primary regard to the statutory words themselves

and to their proper judicial construction.

Particular words must be construed in their

context. Taxing Acts are to be construed strictly,

in the sense that one has to look merely at what

was clearly said, there being no room for any

intention, but a fair and reasonable construc-

tion must be given to the language without leaning

to one side or the other. Whether applying the

terms of the charge, or the terms of the exemp-

tion, no considerations of equity or hardship

affect the construction of the Act."

Barrington J. noted that the object of section 20 was

to remove the exemption from income tax of post-

cessation receipts. He remarked that a barrister had no

legal right to be paid his fees by a client. Counsel for the

taxpayer had argued that, therefore, there was no

enforceable choice in action capable of being trans-

ferred, and that section 20 had to be construed literally

so that a constructive receipt was not sufficient.

Barrington J. considered the meaning of "received"

in the light of the English authorities cited to him, and

adopted the remarks of Lord Hanworth M.R. in

Dewar

-v-

C.I.R.

He said:

" . . . when sums are placed at a taxpayer's

disposal and in fact disposed of by him they are to

be treated for the purposes of the Income Tax

Acts, as having been received by him."

He therefore regarded the letter sent to solicitors as

"a general licence to dispose of fees which would

otherwise be payable to Counsel coupled with a

reference to a specific method of disposition which the

Respondent would find acceptable."

He concluded

"Looking at these transactions as a whole it

appears to me that one is driven to the conclusion

that they really were a disposition by the Respon-

dent in favour of SG Ltd. of moneys which

were due to the Respondent, in law or in honour,

and which would otherwise have been paid to the

Respondent. Under these circumstances, and

despite the strict cannons of literal interpretation

to be applied to Revenue Statutes, it appears to me

to be unreal to suggest that these sums were not

"received" by the Respondent within the meaning

of section 20 of the Finance Act, 1970."

Conclusion

In the light of the overwhelming trend of recent

decisions of the Irish courts, it would appear that the

decision of O'Hanlon J. in the

Metropole

case is an

exception, and the current is running against those

seeking to avoid tax while remaining within the strict

wording of legislation. There are decisions where the

courts have been prepared to interpret legislation

literally so as to remove a liability

or to grant a

relief.

However, these cases did not involve tax

avoidance arrangements of the kind in the

Cork &

County Properties, Belvedere Estates

Club 349

cases.

More significantly, the decision in

Furniss

-v-

Dawson

has been followed by the Appeal Commissioners on at

least one occasion.

In view of the tendency of the

Oireachtas and of the Irish courts to be influenced by

English legislative and judicial precedents, particularly

in the area of taxation, and of the emerging trend in

relation to avoidance cases evidenced by recent Irish tax

cases, it remains to be seen whether the principle in

Furniss

-v-

Dawson

will become part of Irish law.

•

Footnotes

35. (1936) A.C. 1.

Ramsay's

case was cited in the C.A.T. case of

Jacob

-v-

Revenue Commissioners

(High Court, unreported.

6 July 1983, McWilliam J.) but was merely noted without

comment by the Judge at p.7 of his judgment.

36. Address of Mr. Alan Dukes, T.D., Minister for Finance, to the

Institute of Taxation in Cork on 20 May 1985.

37. 'Tax Administration'

Ch.II

(Prl. 3142,1965).

38. Section 63 states that relief does not apply to the issue of shares

by way of exchange within paragraph 4 or under a scheme of

reconstruction or amalgamation within paragraph 5 unless the

issue is for

bona fide

commercial reasons and does not form part

of any arrangement the main purpose or one of the main

purposes of which is the avoidance of tax.

Section 62 FA, 1982, was enacted to deal with

Reverse Nairn

Williamson

schemes (see

Harrison

-v-

Nairn Williamson,

(1978)

S.T.C. 67).

39. S.I. No. 151 and 152 of 1985, respectively, which have been

confirmed in the Finance Bill, 1986. Similar provisions were

introduced in the U.K. in the Finance Acts, 1984 and 1985.

40.

McCarthaigh (Inspector of Taxes)

-v-

Daly,

[1986] 6 ILRM 116.