High Court dismisses appeal on tax rental income, ruling emergency accommodation services constitute trade, not rent.

THE HIGH COURT REVENUE [2025] IEHC 385 Record Number 2020 99 R

IN THE MATTER OF A CASE STATED PURSUANT TO SECTION 949AQ OF THE TAXES CONSOLIDATION ACT 1997 (AS AMENDED)

NIALL HADE Applicant -and-

THE REVENUE COMMISSIONERS Respondent

JUDGMENT of Ms Justice Nessa Cahill delivered on 8 July 2025

INTRODUCTION

1. This is an appeal by way of case stated against the determination of the Tax Appeal Commission (“the Commissioner”) of 5 December 2019 (“the Determination”). This case was stated pursuant to a notice issued by Mr Hade under section 949AP of the Taxes Consolidation Act 1997 (“the TCA”) and was completed in accordance with section 949AQ on 16 November 2020 (“the Case Stated”).

2. The appeal concerns the taxable income earned by Mr Hade in providing emergency accommodation and whether it comes under Case V of section 18(2) of Schedule D to the TCA (which concerns tax “in respect of any rent”). Mr Hade’s position is that the income is rental income. The position of the Revenue Commissioners is that it was income related to “trade” and chargeable under Case I of Schedule D.

3. The income in question was earned by Mr Hade in the provision of emergency accommodation at a property he acquired in 1999 at 2 Kilakea Way, Firhouse, Dublin 24 (“the Property”). From 2003 onwards, the Property was used for the purpose of emergency accommodation pursuant to an agreement between Mr Hade and Dublin City Council (“DCC”) (“the DCC Agreement”).

4. Up until 2007, Mr Hade - through his then accountant - declared the relevant income as trading income and chargeable under Case I. He then filed returns for 2008, 2009, 2010, 2011 and 2012 on the basis the income was rental income and claimed “section 23 relief” to reduce his income tax liability. It is common case that this relief cannot be claimed against trading income.

5. The Revenue Commissioners selected his tax returns for 2010 and 2011 for audit and raised amended assessments for those years on the basis the income was trading income. The additional liabilities levied were the sums of €31,879.28 (for 2010) and €26,967.15 (for 2011).

6. Mr Hade’s appeal against this assessment was unsuccessful. The Determination included some material factual findings which are not appealed. The essential conclusion was that the DCC Agreement provided for lodgings to be provided in exchange for an agreed monthly payment;

that it was not a leasehold agreement; and that the payments were not in the nature of rent.

7. The position of Mr Hade, in summary, is that the assessments were incorrectly made and that the income is rental in nature and falls to be treated under Case I.

8. The questions on which the opinion of this Court are sought are whether the Commissioner erred in law in

“a. [his] interpretation of TCA, section 96(2) [the parties agreed that the reference to section 96(2) was in error and this was amended in the exercise of the court’s inherent jurisdiction at the commencement of the hearing to refer to section 96(1)].

b. Misinterpreting the High Court decision in J Twomey (Inspector of Taxes) v. Bernard Hennessy.”

9. Mr Hade contends that the Commissioner erred in law in both respects and that his conclusions should be set aside or, in the alternative and if necessary, that the matter should be remitted to the Commissioner.

BACKGROUND

10. The facts that are summarised here are derived from the findings of fact summarised in the Case Stated.

11. The Property was occupied by persons in need of emergency accommodation, most of whom were in receipt of social welfare. The Property includes eight bedrooms, containing fourteen bedspaces, an office and a self-contained unit at the rear of the building with a bathroom and kitchen. The occupants of the bedrooms (other than the occupant of the self-contained unit)

shared a self-catering kitchen, laundry and bathroom facilities, and a communal area (although some rooms are ensuite). There is a garden and a car park.

12. The cleaning of the bedrooms was the responsibility of the occupants and cleaning products, toiletries, towels were not provided to them.

13. There were unscheduled inspections by DCC and reporting obligations to DCC in the event of any issues arising with regard to drinking. DCC also attended at the Property two or three times per week to deal with rent and other issues.

14. The payment for the accommodation was calculated on an annual basis and then paid monthly and was based on the number of available beds, not on occupancy. Mr Hade kept a register of occupants and submitted weekly occupancy returns to DCC.

15. Since 2003, the use of the Property has been the subject of an agreement with DCC. The standard terms and conditions were as follows:

"(a) Dublin City Council standard form must be completed and faxed every Monday.

(b) The landlord must have clear house rules, in writing, for residents and staff.

(c) The Landlord must have a complaints procedure for residents in place.

(d) The Landlord must hold a legible register of occupants.

(e) Dublin City Council reserves the right to place any persons who are deemed to be in emergency accommodation in these premises.

(f) Residents must be permitted to remain in the house throughout the 24-hour cycle. The residents must have access to the kitchen throughout the day ... and reasonable access at the night.

(g) Curfew for residents should be 11.00 pm Monday to Thursday and 1.00am Friday to Sunday.

(h) Residents should not bring ... personal belongings as to cause a health or fire hazard.

(i) The Landlord must inform either the Dublin City Council or Northern Area Health board when any person leaves...

(j) The Landlord must make a room available for visiting staff, for example, doctor...

(k) The Landlord will be responsible for providing staffing on a 24-hour basis. This is important to ensure that reasonable house rules are implemented...

(l) It is the policy of Dublin City Council that staff, contract or otherwise, working directly with our client group, should be cleared by the Gardaí...

(m)The Landlord must allow any authorised officer inspect these premises...

(n) The Landlord will be responsible for lighting, heating, all furniture...

(o) The Landlord will be responsible for all building insurance...

(p) The Landlord will be responsible for all maintenance including the upkeep and periodic redecoration of the premises...

(q) The Landlord must submit current Tax Clearance Certificate...

(r) Section 18 (2) of the Fire Safety Act, 1981 places a duty on Landlords to take all reasonable measures to guard against the outbreak of fire on their premises...

(s) Under the Health, Safety and Welfare at Work Act 1989, all organisations are required to compile a Safety Statement...

(t) If the Landlord fails to honour the above conditions Dublin City Council will have the right to terminate any existing agreement immediately without penalty."

16. While Mr Hade denied having been furnished with a “formal copy” of the terms and conditions, the Commissioner found as a fact that Mr Hade confirmed that DCC officials informed him of them and he also confirmed that he complied with most of them (other than imposing a curfew)

(Determination para. 91). In this judgment, I will refer to the “DCC Agreement” on the basis it includes these terms and conditions, which have been found to have been notified to, and broadly complied with by, Mr Hade.

17. Among the other findings of fact which were made in the Determination – and which are not under appeal – are findings that Mr Hade:

a. had his office on the Property (para. 98);

b. was present on the Property during the working day, had a secretary and engaged a “caretaker” to provide supervisory nighttime and weekend services (para. 92);

c. retained control of the common areas; the visiting rooms for nurses; and the kitchen (para. 92);

d. “had access to all rooms in the event of an emergency” (para. 92);

e. “retained control of the premises subject to a degree of oversight by the DCC in terms of routine inspections and reporting functions” (para. 92);

f. was contacted directly about bookings (para. 98);

g. ran the Property under strict rules agreed with DCC (para. 98);

h. provided heating and lighting for the entire Property (para. 93);

i. employed a house-keeper who washed and dried bed linen (para. 93);

j. provided refuse collection and cleaning services for communal areas (para. 93);

k. DCC “had no function in the day to day running of the Property” (para. 98).

The Determination

18. The Commissioner addressed the submissions of the parties, the applicable legislation and caselaw (including the judgment of Laffoy J. in J. Twomey (Inspector of Taxes) v. Hennessy [2011] 4 IR 395 (“Twomey”)), and made the factual findings summarised above.

19. The Commissioner then found that DCC never went into possession of the Property and the occupants did not have exclusive occupation of it (para. 95).

20. He concluded that

“the Appellant was engaged in a trading activity as the level of services that the Appellant was contractually obligated and actually did perform were significantly more extensive than the type of services required to be performed by a landlord under a landlord and tenant relationship” (para. 96)

21. The Commissioner further concluded that

“the income received from DCC was not income derived from the rental of a property pursuant to a landlord and tenant agreement but income received on foot of an agreement to provide inter alia accommodation, supervision, security, bed linen, cleaning, the keeping of a register of all occupants and the associated reporting obligations to DCC when necessitated by circumstances” (para. 99).

22. The Commissioner made the finding that the definition of “rent” in the TCA did not extend to the “additional substantial services provided” by Mr Hade (para. 94) and “the crucial ingredient for the existence of a landlord and tenant was not present” (para. 98).

23. The Determination set out the key findings as follows:

“(a) a landlord/tenant relationship did not exist between the Appellant, DCC or indeed with the homeless person staying in the property;

(b) the Appellant remained in occupation of the property;

(c) the Appellant provided services substantially beyond those normally provided by a landlord;

(d) the payments made by DCC to the Appellant were not in the nature of rent;

(e) there was no lease between DCC and the Appellant, rather the Appellant agreed to provide lodgings and other substantial services for homeless persons who are referred to him by the Department.”

24. On the basis of the findings made, the Commissioners determined that Mr Hade was not involved in a rental activity but was rather carrying on a trade and that the assessment to income tax under Case I was correct. These findings are set out in the Case Stated (paras. 83 to 90).

The Case Stated

25. In the Case Stated, the TAC referred to additional legal grounds raised by Mr Hade but determined that these should not be included in the Case Stated. These are, in summary:

(a) The non-execution of a contract with DCC;

(b) Failure to consider the judgment of the English High Court in Griffiths (Inspector of Taxes)

v. Pearman [1983] STC 184;

(c) Failure to consider the judgment of the English Court of Appeal in Walsh v. Lonsdale (1882)

21 Ch D 9;

(d) Failure to consider the judgment of the English High Court in Gittos v. Barclay (Inspector of Taxes) [1982] STC 390.

26. No application was made to me to amend the Case Stated. The question that are presented on this appeal are therefore the two questions identified in the Case Stated. These questions were set above and require a determination as to whether the Commissioner erred in his interpretation of section 96(1) of the TCA or in the interpretation of the judgment of Laffoy J. in Twomey.

DECISION

Preliminary Points

27. There are seven points I wish to address at the outset.

28. First, the burden rests on Mr Hade on this appeal. This is firmly established in Menolly Homes Limited v. Appeal Commissioners [2010] IEHC 49 and was confirmed in O’Sullivan v. Revenue Commissioners [2021] IEHC 118.

29. Second, there is a high threshold facing an appellant in a case stated of this nature, having regard to the curial deference to be paid to the Commissioner. This point was noted by Mr Hade in his written submissions at para. 11, citing Byrne v. Revenue Commissioners [2021] IEHC 262. As correctly noted by Mr Hade, this question of curial deference should not be overstated and must be read in light of the judgment of the Court of Appeal in Stanberry Investments Limited v. Commissioner of Valuation [2020] IECA 33 (Murray J., Haughton and Power JJ. concurring) and, in particular, in light of the following paragraph from the judgment of Murray J. in that case:

“The Commissioner says in this case, as parties in a similar position frequently do, that the Court should be “slow to interfere with the decisions of expert administrative Tribunals”. Without significant qualification, this statement is apt to mislead. Administrative tribunals, expert or otherwise, obtain no deference on pure issues of law (see Millar v. Financial Services Ombudsman [2015] IECA 126 [2015] 2 IR 156 at - in particular - para. 62). The remarks of Kelly J. in Premier Periclase Limited v. Commissioner of Valuation [1999] IEHC 8, makes it clear that errors of fact simpliciter do not present any issue of curial deference either; “[w]hen conclusions are based on an identifiable error of law or an unsustainable finding of fact by a Tribunal, such conclusions must be corrected” (at para 25). A similar statement of principle appears in Nangles Nursery v. Commissioner of Valuation [2008] IEHC 73 at para. 25. It follows that in both judicial review proceedings, and appeals on a point of law, the scope for ‘deference’ is limited.” (para.

49)

30. As the Court of Appeal underlined in that case, there is no “supercharged presumption of validity”. On the contrary “[d]eference means that in those areas touching on the Tribunal's expertise, the Court should be slow to interfere with the Tribunal's reasoning” (para 52). This does not allow for any deference on questions of law, such as those presented in the Case Stated here.

31. Third, findings of fact in the Determination should not be set aside unless there was no evidence to support them. This has been established as a firm legal principle since Mara (Inspector of Taxes) v. Hummingbird Limited [1982] ILMR 421 at 426:

"A case stated consists in part of findings on questions of primary fact, e.g. with what intention did the taxpayers purchase the Baggot Street premises. These findings on primary facts should not be set aside by the courts unless there was no evidence whatever to support them.” (per Kenny J.)

32. This must be read in light of the clear statement in Stanberry Investments that there is no question of deference when it comes to “errors of fact simpliciter”.

33. In this appeal, there is no challenge to findings of fact made by the Commissioner. So, for example, Mr Hade asserted in this appeal that he did not receive a formal copy of the DCC Agreement. However, the Commissioner in the Determination referred to Mr Hade having confirmed in his evidence that DCC officials informed him of the terms and conditions and that he complied with most of them (save for the imposition of a curfew). There is no appeal against those findings. In addition, Mr Hade himself seeks to reply on aspects of that Agreement. I do not think it is necessary or appropriate to consider this factual question further and do not propose to do so.

34. Fourth, what is before me are only the two points of law identified by the Commissioner. Those questions define the scope of the appeal before me. This case can be equated with the situation in MacCarthaigh v. Cablelink Limited [2003] 4 IR 510 in that respect. There was no application to amend the Case Stated (a possibility that was contemplated by Stack J. in Glynn v. Revenue Commissioners [2021] IEHC 780 citing O'Sullivan v. Revenue Commissioners [2021] IEHC 118).

35. Fifth, it was contended on behalf of the Revenue Commissioners that the key question is whether the payments were by way of “rent”. If they are, then the income comes within Case

V. If the payments are not rental, they may be either “trade” or “other income” within Case IV or Case I of Schedule D respectively, but the Revenue Commissioners contend that this question is a distraction and does not need to be determined. Mr Hade in reply refers to the fact that the assessment by the Revenue Commissioners was that the income was trade-related and that the case being made on appeal does not reflect what was before the Commissioner.

36. On this point, I have considered the Determination and the Case Stated and it is apparent to me that the case presented by the Revenue Commissioners before the Commissioner was that the income was trade-related (consistently with the assessment made). However, the questions presented in the Case Stated address section 96(1) and the interpretation of Twomey. In the Determination, the passages of the judgment of Laffoy J. which are set out are those concerning whether and when payments are rental in nature. I therefore agree that the question I have to assess is whether the income was rental income, which can be viewed against the position of the Revenue Commissioners that it is to be treated as trade-related income in light of the judgment in Twomey.

37. Sixth, both parties relied on the principles for the interpretation of legislation as set out in Perrigo Pharma International DAC v. Revenue Commissioners [2022] IEHC 522 and in Heather Hill Management Company v. An Bord Pleanala [2022] IESC 43.

38. Based on those cases, the relevant principles for the purposes of this appeal appear to me to be that primacy is to be given to the language in fact used and the plain words in a statute are to be given their ordinary natural meaning, viewed in the clear and specific context in which they are used. Different approaches may be taken to the interpretation of ambiguous words. An important overarching principle in interpreting taxation legislation is that ambiguous terms should be construed strictly so as to prevent a fresh and unfair imposition of liability based on unclear language.

39. Seventh, Mr Hade placed reliance on certain Revenue Commissioner manuals. It was said by counsel for the Revenue Commissioners that these were not before the Commissioner; that the case is confined to the Case Stated; and that Mr Hade would have apply to admit new evidence to bring these documents into the scope of the appeal (a proposition for which reliance was placed on O’Sullivan v. Revenue Commissioners [2021] IEHC 118). While it was said that, technically, the manuals should not be admitted as they are new evidence, it was accepted that they could be considered as commentary, but not as being binding on the Revenue Commissioners or as being capable of giving rise to an estoppel.

40. I note that there are references to several manuals in the Determination itself (the Manual on the “Tax Treatment of Income”; the manual on “Value Added Tax (Short Term Guest Sector or Holiday Sector” and the “CAT Manual Business Relief” are all referenced at page 10 of the Determination for example). Those manuals were therefore before the Commissioner.

41. There appears to be an additional manual relied upon during the hearing before me (the manual on “Emergency Accommodation and Ancillary Services”). I note that this manual does not appear to have been before the Commissioner but I do not believe the objection to reliance being placed on this manual (or the manuals which were before the Commissioner) are wellmade. I propose to treat the manuals as guidance issued by the Revenue Commissioners and note and accept the submission that they are not binding as a matter of law.

Relevant legislation

42. The starting point is section 75(1) of the TCA:

“Without prejudice to any other provision of the Income Tax Acts, the profits or gains arising from—

(a) any rent in respect of any premises, and

(b) any receipts in respect of any easement, shall, subject to and in accordance with the provisions of the Income Tax Acts, be deemed for the purposes of those Acts to be annual profits or gains within Schedule D, and the person entitled to such profits or gains shall be chargeable in respect of such profits or gains under Case V of that Schedule; but such rent or such receipts shall not include any payments to which section 104 applies…”

43. Section 18(1) then provides that tax under Schedule D shall be charged under the following cases:

“Case I— Tax in respect of—

(a) any trade;

(b) profits or gains arising out of lands, tenements and hereditaments in the case of any of the following concerns—

(i) quarries of stone, slate, limestone or chalk, or quarries or pits of sand, gravel or clay,

(ii) mines of coal, tin, lead, copper, pyrites, iron and other mines, and

(iii) ironworks, gasworks, salt springs or works, alum mines or works, waterworks, streams of water, canals, inland navigations, docks, drains or levels, fishings, rights of markets and fairs, tolls, railways and other ways, bridges, ferries and other concerns of the like nature having profits from or arising out of any lands, tenements or hereditaments;

… Case IV— Tax in respect of any annual profits or gains not within any other Case of Schedule D and not charged by virtue of any other Schedule;

Case V— Tax in respect of any rent in respect of any premises or any receipts in respect of any easement..”

44. The next relevant provision of the TCA is section 96(1):

“‘easement’ includes any right, privilege or benefit in, over or derived from premises;

‘lease’ includes an agreement for a lease and any tenancy, but does not include a mortgage, and ‘lessee’ and ‘lessor’ shall be construed accordingly, and ‘lessee’ and ‘lessor’ include respectively the successors in title of a lessee or a lessor;

‘the person chargeable’ means the person entitled to the profits or gains arising from—

(a) any rent in respect of any premises, and

(b) any receipts in respect of any easement;

‘premises’ means any lands, tenements or hereditaments in the State;

‘premium’ includes any like sum, whether payable to the immediate or a superior lessor or to a person connected with the immediate or superior lessor;

‘rent’ includes—

(a) any rentcharge, fee farm rent and any payment in the nature of rent, notwithstanding that the payment may relate partly to premises and partly to goods or services, and

(b) any payment made by the lessee to defray the cost of work of maintenance of or repairs to the premises, not being work required by the lease to be carried out by the lessee.”

45. The position that may be derived from those statutory provisions (about which no ambiguity has been asserted by either party) is that profits from any rent in respect of any premises are chargeable under Case V. “Rent” includes “any payment in the nature of rent, notwithstanding that the payment may relate partly to premises and partly to goods or services.”

46. Reliance was also placed by both parties to the appeal on section 10(1) of the Housing Act 1988:

“A housing authority may, subject to such regulations as may be made by the Minister under this section—

(a) make arrangements, including financial arrangements, with a body approved of by the Minister for the purposes of section 5 for the provision by that body of accommodation for a homeless person,

(b) provide a homeless person with such assistance, including financial assistance, as the authority consider appropriate, or

(c) rent accommodation, arrange lodgings or contribute to the cost of such accommodation or lodgings for a homeless person.”

47. The question is whether DCC in this case rented accommodation or arranged lodgings at the Property.

48. The primary judgment that is relevant to this appeal is that of Laffoy J. in Twomey. Given that the second question on which the opinion of this Court is sought hinges on that judgment, and it is also centrally relevant to the first question, it will be addressed in some detail.

Twomey (Inspector of Taxes) v. Hennessy

49. The facts of this case were that a partnership acquired one, two and three bedroom units which contained the bedrooms, a sitting room, bathroom and kitchen. The units were primarily used as student occupation between October and May, and then as self-catering accommodation by tourists and business travellers during the Summer months. The partnership also rented premises on the ground floor of the building from which an office/reception, a shop/café, and a launderette were operated (the tax treatment of the premises on the ground floor was not part of the case).

50. A member of the partnership sought to claim trading loss relief augmented by capital expenditure on the basis that the activity of the partnership (in the residential units) was in the nature of trade and the units were not occupied as dwellings or parts of dwellings. The entitlement to this relief hinged on the interpretation of provisions of the Income Tax Act 1967 and the Finance Act 1986 concerning relief for capital expenditure. The key issues were (a)

whether this constituted the carrying on of trade in the units and (b) whether the partnership was entitled to capital allowances on the basis the units were used in trade and not as dwelling houses (or part of dwelling houses).

51. The claim to relief was refused by the Revenue Commissioners, On appeal, the Circuit Court found in favour of the partnership, ruling that the partnership carried on a trade in units and was liable to income tax under case I of Schedule D. A case was then stated for the opinion of the High Court.

52. In the High Court (Laffoy J.) said that a “central” question was whether the partnership was chargeable to tax under Case I, Case IV or Case V of Schedule D of the TCA (para. 11). There is a clear parallel with this case (despite some obvious differences in the facts and the issue raised).

53. Reference was made to section 75 of the TCA. Notably, the definition of “rent” in the Income Tax Act 1967 (section 80) was identical to the definition in section 96(1) of the TCA. It defined “rent” as including “any payment in the nature of rent, notwithstanding that the payment may relate partly to premises and partly to goods or services.”

54. Some of the facts of that case also bear a resemblance to this one and there are certain points of distinction. One similarity is that the majority of the guests were long term residents (more than 182 days in the case of Twomey). Like here, the accommodation was self-catering.

Another similarity is that occupation was on a per-bed basis and commonly persons shared a room with strangers. For business and tourism guests, there were additional services, like the provision of towels, televisions and cleaning services (albeit not provided to students).

Inspections were carried out on a regular basis and a manager and other support staff were employed on the premises (as here).

55. One difference emphasised by Mr Hade is that the number of occupants in Twomey (1,050 guests between March 1995 and December 1998) was greater than in this case. I do not see how that fact can be material in terms of weighing the relevance of Twomey. There can be short-term rental arrangements entered into for the occupation of hundreds of units, without altering the existence of a landlord-tenant relationship: the issue is not the number of units or tenants, but the terms of the occupation, the extent of the services provided and the rights of possession (among other relevant circumstances). Each case falls to be judged on its own particular facts.

56. Another difference with Twomey is that, in that case, the booking forms and registration forms that were completed by residents included the express stipulation that nothing contained in those documents would “constitute a landlord and tenant relationship within the meaning of the Landlord and Tenant Acts, or otherwise”. There is nothing equivalent to that in this case (although of course in this case the contract here is with DCC).

57. Dealing with the topic of “rent” first, the position of the Revenue Commissioners was that the income was to be treated as rent within the meaning of case V (the same position advanced by Mr Hade in this appeal). Laffoy J. rejected this:

“I do not agree with the appellant's submission that it was assessable under case V, which was the fulcrum of the appellant's case on this issue. In particular, I do not agree with the appellant's submission that the income which the partnership received for the use of the units in block B was either rent or receipts in respect of an easement within the meaning of case V.” (para. 60)

58. The following passages from the judgment of Laffoy J. are critical to this question:

“On the question whether the profits or gains from the units arose from rent in respect of the units, having regard to the provenance of the material part for present purposes of the definition of ‘rent’, in my view, ‘any payment in the nature of a rent’ means a payment by a lessee or tenant to a lessor or landlord in the context of a landlord and tenant relationship. That is both its ordinary or colloquial meaning and what lawyers and property experts would understand it to mean. I can see no basis whatever for giving any broader meaning to the word ‘rent’. The addition of the words ‘notwithstanding that the payment may relate partly to premises and partly to goods or services’ in the definition makes it clear that payment will be rent even though it covers the provision of furnishings and services in addition to the use of the premises.

However, in my view, the additional words do not impact on the proper meaning of ‘a payment in the nature of rent’.

Specifically, I reject the contention of the appellant that the Circuit Court Judge misled himself in placing too much emphasis on whether the relationship of landlord and tenant existed between the partnership and a user, and in failing to identify that the income received by the partnership constituted rent. In my view, the existence of such a relationship was the crucial ingredient to justify a conclusion that the payment received by the partnership came within the material portion of the definition of ‘rent’.

The Circuit Court Judge, in my view, correctly concluded that the crucial ingredient was missing, because of the terms of the contract between the partnership and the user of a unit, which expressly excluded the creation of the relationship of landlord and tenant.” (paras. 62-63).

59. This judgment summarises succinctly the key question when determining whether a payment is “in the nature of rent”: was the payment by a lessee or tenant to a lessor or landlord in the context of a landlord and tenant relationship? That relationship is the “crucial ingredient” for a payment to constitute “rent”. The fact that the payment may include payments for good and services does not broaden the meaning or scope of the term “rent”. Laffoy J also concluded that the duration of the stay did not convert the nature of the payments into rent under case V.

(para. 67)

60. In Twomey, it was the tax-payer who argued that the operation of the units by the partnership was trade-related. It was contended that the use of the units had six “badges of trade” (as so labelled in the final report of the Royal Commission on Taxation in 1954), namely:-

“(a) there were 1,050 guests in the units in the three and a half year period analysed, which was greatly in excess of what would have been appropriate or expected in the case of lettings of the units over the same period;

(b) supplementary work was carried out in the units and extensive services were provided to the guests;

(c) the motive of the partnership was to ensure full occupancy levels from whatever market existed at a particular time and to make profits;

(d) the activities of the partnership were very similar, if not the same as, those found in running a guesthouse or providing "digs" in a house, both of which are accepted by the Revenue Commissioners as being the carrying on of a trade;

(e) the partnership was operated and managed professionally on a day to day basis and incurred significant staffing costs and marketing costs; and

(f) any change in the nature of the guests between the tourist season and the winter season did not give rise to any change in the activities of the partnership.” (para. 57).

61. Laffoy J. concluded that these factors support the determination that the partnership was using the units for the purposes of the trade of providing accommodation for users. The fact that guests were predominantly long-term guests did not alter this finding or convert the income into rent or “an annual profit or gain of an indeterminate variety not captured by any other provision of the tax code, so as to come within case IV” (para. 67). Accordingly, Laffoy J. in Twomey upheld the decision of the Circuit Court that it was assessable under case I.

62. The overriding conclusion was that the effect of the exploitation of a property owner’s rights “depends on the nature of the arrangements between the owner and the user” (para. 68). This judgement in Twomey puts it beyond doubt that no assumption can be made about the treatment of income from the exploitation of a property owner’s rights. It is necessary to scrutinise the arrangements between the owner and user.

63. In the course of the hearing of the appeal before me, the only cases opened on the specific question of whether the occupation was rental or trade-related (or indeed whether it was related to “other services”) were Twomey and Griffiths v. Jackson [1983] STC 184. I note from the Case Stated that a large number of cases were opened before the Commissioner, but the parties confined their submissions (written and oral) to those two cases in the appeal before me.

64. It may be noted immediately that Griffiths v. Jackson long pre-dates the governing authority of Twomey; it concerns taxation under Schedule A; it does not have any binding weight or authority here (being a decision of the Chancery Division of the English High Court). The only passage opened by Mr Hade was the final paragraph of the judgment of Vinelott J. in which he concluded that letting furnished rooms may be a business but was not a trade (in the circumstances of that case).

65. It is also important to record that Laffoy J. distinguished Griffiths v. Jackson as well as several other English cases which were opened to her (many of which were also opened to the Commissioner in this case). The distinctions noted were that the occupation in those cases was based on “a lease or letting which created a landlord and tenant relationship” and that the decisions were “infected… with the Schedule A principle” (if income from rent was chargeable under Schedule A, the question of trade-related tax under Schedule D did not arise). She found that, given these points and the abolition of Schedule A in this jurisdiction in 1969, that case (and the others cited) were “of very little relevance, if any, for present purposes”. I share that view here.

66. The judgment of Laffoy J. in Twomey is the authoritative decision on the interpretation of the same definition of “rent” that appears in section 96(1). It is also the only judgment opened to me that assesses the correct case of Schedule D under which income from the provision of accommodation with additional services is to be charged. This does not mean that the outcome on the facts that pertained in Twomey is binding here: each case must be assessed on its own merits. However, the analysis and reasoning in the judgment of Laffoy J. in Twomey are squarely applicable and binding here. Given the factual and legal similarities between that case and this, I consider that the judgment of Laffoy J. is one to which significant weight must be attached in this appeal.

ANALYSIS

67. Turning to the terms of the Case Stated, I regard the two questions presented as being indivisible. This is because the correct interpretation of section 96(1) must and does hinge heavily on the only judgment of the Irish courts which interprets the relevant language in that sub-section, namely the judgment of Laffoy J. in Twomey. I do not see how the interpretation of section 96(1) can usefully be interpreted independently of an analysis of that judgment. I will therefore consider the two questions together and then set out my answers to each in the

conclusion to this judgment.

Questions 1 and 2

68. The relevant language in section 96(1) is the definition of “rent” which is stated to include “any payment in the nature of rent, notwithstanding that the payment may relate partly to premises and partly to goods or services.” This section appears in Part 4, Chapter 8, of the TCA. Part 4 is headed “Principal Provisions Relating to the Schedule D Charge” and Chapter 8 is then titled, “Taxation of rents and certain other payments”.

69. The question for determination in this appeal is whether the Commissioner was correct in his interpretation of section 96(1) and of the judgment in Twomey (which in turn interprets the same words).

70. The definition of “rent” requires an assessment of what the words “payment in the nature of rent” mean. The position of the Revenue Commissioners was that this formulation does not broaden the concept of “rent” but rather confirms that the key question is not the label or description applied to a payment but the “nature” of the payment in question.

71. From the ordinary language used, I am satisfied that this interpretation – which was clearly the interpretation adopted by the Commissioner - is correct as a general proposition. The question to ask is not what the payment is called but whether it is “in the nature of rent”.

72. From this starting point, the next step is to decide whether the payment is made “in the context of a landlord and tenant relationship” (Twomey at para 62). Laffoy J. could “see no basis whatever for giving any broader meaning to the word ‘rent’...” I in turn see no basis for differing from her view on this important question. On the contrary, as already noted, I consider the judgment of Laffoy J. to be directly relevant and applicable here.

73. Accordingly, the question to be asked is whether there is a landlord-tenant relationship. This may include an assessment of whether the payments made indicate a different form of relationship to exist, but, if the relationship is a landlord-tenant one, the fact that other services and furnishings are provided and paid for as well as the provision and payment for the premises will not alter that fact. This is manifest from section 96(1) and confirmed by Twomey. A consideration that is at the heart of the test is whether the tax-payer remained in possession of the property or conferred exclusive possession of the property in question on the other party.

74. These are precisely the points that were made by the Commissioner (Determination, paras. 86- 88, para. 94) and are a correct statement of the approach that must be taken to determining whether a payment made in connection with the provision of accommodation is rental or traderelated for the purposes of deciding its correct designation under Schedule D. There can be no criticism of the formulation of the applicable legal principles by the Commissioner and I see no error of law in this aspect of the Determination.

75. The next question is whether the Commissioner erred in interpreting section 96(1) or the judgment in Twomey as they apply to the specific facts of this case.

76. The findings of fact made in the Determination have already been summarised and are not repeated here (see para. 17 above). There is no appeal against these findings.

77. Based on the findings of fact arrived at, the Commissioner proceeded to draw certain inferences and form conclusions, which can be usefully grouped and analysed under three headings. I will assess these conclusions, the primary submissions made by the parties to this appeal, and my ruling in respect of each conclusion, under each of these three headings.

78. First, the Commissioner formed certain conclusions regarding the occupation of the Property.

Significantly, he concluded that DCC never went into possession of the Property and the occupants had no rights of exclusive occupation. He concluded that Mr Hade retained exclusive possession and control of the Property and that DCC had no function in the day to day running of the Property.

79. The position of Mr Hade before the Commissioner was that the entire Property was rented by DCC and the presence of staff was consistent with other multi-let accommodation structures which would include the presence of a caretaker (Case Stated, para 22). He said it was at all times rented by DCC as a single property. In this appeal, he contended that the Commissioner’s findings regarding possession, occupation and control were incorrect, and that the bedrooms were in the exclusive (albeit shared) occupation of the lodgers and that DCC had control of, and ran, the Property. He emphasised that the occupants used their own cleaning materials and their own keys and own rooms. A further factual point he made was that the secretary who worked at the Property was, at the time, engaged by him to deal with several other properties in addition to the one at issue in this appeal.

80. In this appeal, the Revenue Commissioners contended that a distinction must be drawn between exclusive possession and exclusive occupation. It was contended that a property owner may give a right of exclusive occupation to an occupier (such as a lodger or hotel guest) while retaining an exclusive right of possession. The position of the Revenue Commissioners was that the occupants of the Property do not have exclusive possession which would be characteristic of a tenancy and that the duration of occupation does not alter this fact. It was said that there was a licence rather than a lease in this case. A factual point made was that the requirement in the DCC Agreement that Mr Hade would make a room available for visiting staff, doctors or other persons confirmed that control and possession rested with Mr Hade.

81. Counsel for the Revenue Commissioners opened extracts from Wylie on Landlord and Tenant Law (3rd Ed) at the hearing in which the requirement of control and the right to exclude others are emphasised as indicia of a tenancy (para. 2.38).

82. I do not consider that Mr Hade’s contentions are consistent with the (unchallenged) findings of fact made by the Commissioner (see para. 17 above). The evidence as found was that he was in occupation of the Property on a near-daily basis and had an office there. The person he appointed as caretaker was present at all times at the weekend and at nighttime. Mr Hade took bookings directly from the Department of Social Protection and kept a register of occupants.

He arranged for bed sheets to be changed by a house-keeper, common areas to be cleaned, and rubbish to be removed. I accept the point made by the Revenue Commissioners that the stipulation that Mr Hade would make a room available for visiting staff underlined the fact that it was Mr Hade who was in possession and control of the Property.

83. The fact that the individuals had occupation of the bedrooms, keys, and cleaned their own rooms does not detract from these findings by the Commissioner. Guests in hotels and lodgers in bedsits have keys to their bedrooms. Moreover, it must be emphasised that the question in this appeal (as before the Commissioner) is not confined to the occupation of the bedrooms: the case was presented on the basis that DCC rented the entire Property from Mr Hade. The comparison with multi-let accommodation is therefore misplaced, as the issue in this case is not the agreement with occupants of individual units or bedrooms, but the property as a whole.

84. In short, Mr Hade has not discharged the onus of showing that the Commissioner’s conclusions regarding possession were incorrect as a matter of law. I do not see a basis in law or fact for disturbing the Commissioner’s findings that Mr Hade remained in possession and DCC did not have exclusive possession of the Property. The factual findings made are unambiguous and unchallenged and, in light of those findings, I do not see how it can be contended that DCC has exclusive “control” of the Property or the right to exclude Mr Hade or any other person from the Property.

85. Secondly, the Commissioner found that there was “no lease”. Mr Hade challenges this, relying on the definition of “lease” in section 5 of the TCA (in the Part that deals with capital gains tax). The Revenue Commissioners contend that it would be an error of law to use that definition for income tax. It was contended that there is a broader definition of “lease” for CGT to ensure that arrangements are not designated as licences to allow for capital gains without CGT and that it would be incorrect to apply that definition to the income tax context. It was noted that there is no definition of “lease” for income tax as that regime is concerned with the payments made.

86. The TCA does not provide for the same definitions to be applied across its different parts.

Quite to the contrary: the definitions are specific to the part in which they appear. Accordingly, I accept and agree with the contention made on behalf of the Revenue Commissioners that the definition of “lease” cannot be adopted from that context into this. The correct approach to the interpretation of whether income was rental for the purpose of Schedule D is the approach outlined in Twomey and not the application of a broad definition in section 5 of the TCA. There is no apparent error in the Determination in this respect.

87. Another point made by Mr. Hade was that the DCC Agreement as a rental agreement. He emphasised the references in it to “the Landlord”. I have already noted that the important question is the substance of the relationship, not the label used, and regard this submission to be unpersuasive in light of the findings of fact made by the Commissioner.

88. Third, the Commissioner found that the services provided by Mr Hade “were significantly more extensive” than the services that are required in a landlord-tenant arrangement. The services referenced included the provision of supervision, security, bed linen, cleaning, keeping of a register, and reporting obligations to DCC.

89. Mr Hade asserts in this appeal that the Commissioner erred and that the Oireachtas did not provide for a level or quantum of services that brings a payment outside the scope of “rent”.

He disputes the position of the Revenue Commissioners that the amount paid was greater than would be paid for rent alone. He emphasised the need to interpret the plain language of the legislation and asserted that the Commissioner placed a lot of weight on the level of services provided and that he misinterpreted section 96(1). On the facts themselves, Mr Hade disputed that the ancillary services provided (or the time and money spent on them) were relevant or that they altered the fact that it was a rental arrangement.

90. Mr Hade is correct that there is no legislative cut-off point in terms of the services that may be provided in a rental situation. Section 96(1) clearly contemplates the possibility that some level of services can be provided by a landlord without altering the rental relationship. The question is whether the services are of such a character and extent that they indicate that the relationship is not in fact that of landlord and tenant. This is a more nuanced matter and must be decided on the basis of the facts and circumstances of a particular case.

91. What the Commissioner relied upon in this case was the nature – as well as the scale – of the services provided. The services here are similar to those assessed in Twomey and which were identified in that case among the “badges of trade” that brought the income received outside the net of “rent.” Providing and laundering bed linen is certainly not typical or characteristic of a landlord/tenant relationship, for example, and the 24-hour presence of Mr Hade (or a caretaker employed by him) is not consistent with the Property in its entirety being rented by DCC. I identify no error in the Commissioner’s findings in this respect.

92. Before leaving Twomey, I would observe that some of the “badges of trade” relied upon by the tax-payer in that case are not applicable here. For example, there are no findings in the Determination here to suggest that Mr Hade engaged in advertising or marketing or had any motivation or incentive to maximise occupancy of the units. His role in relation to bookings was limited, according to the findings of fact made.

93. As mentioned in the preliminary comments, the questions presented in the Case Stated are focussed on whether the income was rent-related, rather than on whether it was trade-related and within Case I. It is also not apparent from the Determination that the Commissioner relied on the “badges of trade” that were important in Twomey to find that the income earned by Mr Hade was trade-related. I therefore do not propose to make findings as to any interpretation of that aspect of Twomey (as it is not clear to me there was any such interpretation) but would observe that these points of apparent distinction do exist.

Additional points made by Mr Hade

94. Mr Hade points to the DCC order for the payment to be made to Mr Hade for the provision of emergency accommodation under section 10 of the Housing Act 1988. The first such order was issued on 7 July 2003 and further orders were made on 11 May 2005 and 16 November 2007 for the increase of the rates of payments. Each of these orders refers to "…an agreement for the provision of emergency accommodation for indigenous homeless persons..." He emphasises the reference to “accommodation” and contrasts this with lodgings, urging that the DCC Agreement is not an agreement for the purpose of lodgings. It is not clear how this comes within the scope of the Case Stated, but I will consider the point for completeness. In support of his contention, Mr Hade emphasises the language of section 10(1)(c) of the Housing Act 1988 which refers to the options of a housing authority to “rent accommodation, arrange lodgings or contribute to the cost of such accommodation or lodgings for a homeless person”.

He asserts that DCC here refers to “accommodation” and that must connote that the arrangement in place with Mr Hade was rental in nature.

95. Counsel for the Revenue Commissioners points out in reply is that section 10(1)(a) states that a housing authority may make arrangements for “the provision… of accommodation for a homeless person” and that accommodation is not to be equated with a tenancy.

96. While I understand why Mr Hade wishes to emphasise the use of the word “accommodation”

in the DCC orders, I cannot accept that the use of that generic term, without any reference to “rent” indicates an intention on the part of DCC to provide rental accommodation rather than lodgings. The material language of section 10(1)(c) is that the authority may “rent accommodation” or “arrange lodgings”: both are means of housing or accommodating a homeless person. I reject the contention that using the term “accommodation” in the DCC orders indicates which is provided. I note too that those orders refer to the provision of “the service” by Mr Hade and the order of 11 May 2006 refers to Mr Hade’s application for an increase in the rate of payment owing to “significant increases in the day-to-day costs of providing the service”. These point to something other than rental accommodation. In any event, and more significantly, even if DCC described the agreement with Mr Hade as “an agreement to rent accommodation”, that would not be definitive as to the nature of an arrangement or payment. It is for this reason that I reject Mr Hade’s reliance on the use of the word “landlord” in the DCC Agreement. The question is one of substance and requires an analysis of all relevant facts and circumstances. It is not decided by the label applied by either or both parties.

97. Mr Hade relied on the manual on Tax Treatment of Income arising from the Provision of Short- Term Accommodation (part 04-01-20) (February 2020). The Determination states that he opened a document titled “Tax Treatment of Income” to the Commissioner and it appears to be the same document. In any event, that document sets out the established legal principles that have already been summarised in this judgment, including the following:

a. The central question is whether there is a landlord-tenant arrangement;

b. This depends on the facts and circumstances of each case;

c. One important factor is whether the owner retains exclusive possession of the property;

d. If the guest does not have the right to exclude others, this indicates there is no tenancy arrangement;

e. If the owner requires regular access to the property to provide services such as cleaning, cooking, changing bed linen, that points towards a licence and not a lease;

f. Temporary, short term occupation (such as holiday home accommodation, guesthouses, hostels) are more typical of licences rather than leases;

g. In deciding whether there is a trade-related use, relevant factors are whether the property/room is available for rent on a frequent basis and whether the owner is letting the property commercially with a view to making a profit (such as advertising, dealing with booking enquiries, reservations, arranging for cleaning and maintenance between occupancy, providing tourist information and other services).

98. These statements are not controversial or novel and many of them mirror findings made by Laffoy J. in Twomey. They do not elide the overarching point, which is that the correct treatment of income earned from the provision of accommodation can only be determined on the basis of an analysis of the facts and circumstances of each individual case. Moreover, several of these principles point firmly away from the income earned by Mr Hade being rental income.

99. Another manual on which Mr Hade relied was the manual on Emergency Accommodation and Ancillary Services (December 2024) which confirms that the provision of emergency accommodation is exempt from VAT. I do not see any relevance in this manual and derive no assistance from it.

100. The manual on Business Relief from Capital Acquisitions Tax (November 2015) was emphasised by Mr Hade. He particularly focussed on the question of when the provision of accommodation is a business activity for the purpose of claiming business relief. The passage in question (at page 18 of the manual) refers to the proposition that an activity can be rental in its character even if it is accompanied by the provision of services. It then points out that the level of such services would have to be “exceptional” to become the major activity for the purpose of deciding whether the property was used “wholly or mainly” for the purposes of a business. The question of relief from CAT and the so-called “wholly or mainly” test are not applicable here. The tests and principles applied in that context are therefore of limited relevance to this case and I do not consider it appropriate or helpful to have further regard to the CAT regime.

CONCLUSIONS

101. I answer the two questions presented as follows:

Question One: Did the Commissioner err in law in his interpretation of TCA, section 96(1)?

102. I can see no error of law in the approach taken by the Commissioner to the interpretation of section 96(1). I agree with his findings that the relationship between Mr Hade and DCC with regard to the Property was not in the nature of a landlord-tenant relationship and the income Mr Hade earned for the services and accommodation provided was not therefore “in the nature of rent”. This is based on an assessment of all of the factual findings and relevant facts and circumstances of the matter viewed in their entirety. A point to which heavy weight must be attached is that the findings of fact simply cannot support a conclusion that DCC was in exclusive possession (or indeed exclusive occupation or control) of the Property.

103. Accordingly, my answer to this question is that the Commissioner did not err in his interpretation of section 96(1).

Question Two: Did the Commissioner err in law in misinterpreting the High Court decision in Twomey?

104. The judgment of Laffoy J. in Twomey is of undoubted importance to this case. Mr Hade contended that the Commissioner misinterpreted that judgment and he points to certain distinctions, including the fact that Twomey involved a large number of guests. He also asserts that Twomey was concerned with Schedule A rather than Schedule D.

105. While there are points of distinction, legally and factually, between that case and this one, the principles set out in it are clearly binding and authoritative here. I do not see that the number of occupants or other differences warrant or justify any deviation from the principles stated by Laffoy J. It is also erroneous to suggest that Twomey was concerned with Schedule A.

106. The fundamental point is that Laffoy J. in Twomey set out the correct approach to apply to the interpretation of the term “rent” as defined in section 96(1) (as defined in identical terms in the provision at issue in that case, section 80 of the Income Tax Act 1967(as amended)). Mr Hade has demonstrated no error in the approach taken by the Commissioner to the interpretation of that judgment and, on the contrary, I am satisfied that the Commissioner correctly attached weight to the findings that Mr Hade did not give up exclusive possession of the Property, but maintained control of it, and provided services which went beyond the scope of a landlord’s activities and which necessitated a permanent presence at the Property; the hiring of staff; and day-to-day expenses being incurred. I can identify no error in the Determination with regard to the interpretation of the judgment of Laffoy J. in Twomey.

107. As this judgment is delivered electronically, I will list the matter before me at 10am on 15 July 2025 for the purpose of hearing any brief submissions the parties may wish to make regarding the costs of this appeal and the appropriate orders to be made.