Supreme Court dismisses appeal holding general anti-avoidance opinion raising is barred by four-year tax limitation period.

THE SUPREME COURT

[Appeal No: 218/2011]

Clarke J.

Dunne J.

O’Malley J.

Between/

The Revenue Commissioners

Appellant

and

Hans Droog

Respondent

Judgment of Mr. Justice Clarke delivered the 6th October, 2016

1. Introduction

1.1 The introduction, through s.86 of the Finance Act, 1988, of a general anti-avoidance provision into our tax code represented a

radical departure in the Irish tax code. Up to that point the general position was that identified by this Court in McGrath v McDermott

(Inspector of Taxes) [1988] I.R. 258. Provided that a set of arrangements had the technical effect of reducing a person’s liability to

tax in accordance with the Taxes Acts as properly interpreted then the person concerned was entitled to the benefit of that

reduction in tax irrespective of the motive for, or substance of, the transaction concerned. A clear distinction was made between

what was called tax evasion, which involved the improper concealment of facts from the tax authorities so as to unlawfully reduce

tax, on the one hand, and tax avoidance, which involved structuring ones affairs in a manner which minimised tax, on the other. Tax

avoidance itself might perhaps be described as having operated on a spectrum which ranged from cases where persons simply

conducted their affairs in a manner which had regard to tax law to, at the other end of the spectrum, cases where persons engaged

in activity which, to a greater or lesser extent, might be said to have been artificial for the principal purpose of reducing their liability

to tax. The general anti-avoidance measures originally found in s.86 and now to be found in section 811 of the Taxes Consolidation

Act, 1997 (“section 811”) (“the TCA”) were intended to prevent persons towards the “artificial” end of that spectrum from gaining the

benefit of the tax reduction which might technically otherwise be available while at the same time allowing persons the reasonable

opportunity to conduct genuine economic activity in a manner which was considered to be most tax efficient.

1.2 The net issue which arises on this appeal is as to whether time limits which apply generally in respect of certain types of action

by the appellant (“Revenue”) have application to the relatively specific process which is provided for in section 811 which is designed

to seek to deprive a tax payer of the benefits of what is defined in that section as a tax avoidance transaction.

1.3 As will appear later in this judgment a general time limit of four years is applicable in respect of some (but not all) taxes but in

particular applies in the case of the tax which underlies the issue in this case being income tax covered by the self-assessment

regime. Subject to certain exceptions, where it can be said that a tax payer acted fraudulently or negligently, Revenue are not

entitled to seek additional income tax from a self-assessed tax payer more than four years after the tax year concerned. In

circumstances which will be outlined in early course Revenue sought to implement the procedures designed to allow for the reversal of

the effects of a tax scheme in the case of the respondent (“Mr. Droog”) but made the first formal step in that process, being the

formation of a relevant opinion under section 811 and its communication to Mr. Droog, at a time which was clearly outside that four

year time limit. The net question is as to whether that time limit applies in the context of section 811.

1.4 The Appeal Commissioners held that it did. The High Court (Laffoy J.) agreed and Revenue have appealed to this Court. For the

reasons set out in this judgment I have also concluded that the time limit applies. I should firstly turn to the relevant facts which can

be briefly stated and are not in dispute.

2. The Facts

2.1 This case relates to income tax for the fiscal year 1996/1997. In his return for that year, which was filed under the self-

assessment system, Mr. Droog claimed relief for a loss of IR£50,046 in respect of his share of the losses of a partnership called Taupe

Partners which was involved in the acquisition, distribution and licensing of films. On the 25th February, 1998 Mr. Droog received an

assessment for that tax year which was in accordance with his return and which allowed relief in respect of that loss.

2.2 On the 22nd February, 2007 a nominated officer of Revenue (“the Nominated Officer”) gave notice in writing of an opinion under

s.811(6) of the TCA to Mr. Droog. That notice stated first that an opinion had been formed that the transaction set out in the notice

was a tax avoidance transaction within the meaning of section 811. Second, the Nominated Officer expressed the opinion that a tax

advantage of IR£24,022 had arisen as a result of the transaction in question. That advantage represented 48% of the relevant loss

and thus represented the reduction in income tax which had arisen from the initial allowance of relief in respect of that loss. In other

words by virtue of his involvement in Taupe Partners and the losses thereby suffered Mr. Droog had, initially, paid IR£24,022 less tax.

Third, the notice stated that, in the event that the Nominated Officer’s opinion should become final and conclusive, that benefit,

being the loss relief claimed by Mr. Droog, would be withdrawn.

2.3 None of those facts are in and of themselves controversial although, of course, the question of whether the transaction specified

in the notice involving Taupe Partners actually was a tax avoidance transaction has never come to be determined precisely because

both the Appeal Commissioner and the High Court took the view that the initiation of the process by the service of that notice was

out of time. Mr. Droog, in accordance with s. 811(7) of the TCA, appealed against the relevant notice on a range of grounds including

a contention that the notice of opinion was out of time by reason of ss.924, 955 and 956 of the TCA. The Appeal Commissioner

decided to conduct an initial hearing which was to deal solely with the question of the time limit. That hearing took place on the 20th

October, 2009 and thereafter the Appeal Commissioner issued a determination on the 18th December of that year which was to the

effect that the four year time limit set out in ss.955 and 956 of the TCA applied to the formation of an opinion under section 811 so

that the opinion in this case was, in the view of the Appeal Commissioner, out of time. Thereafter a case stated on that issue was

sent by the Appeal Commissioner concerned to the High Court. It should also be recorded that the case stated found as a fact that

there was no suggestion of fraud or neglect on the part of Mr. Droog in relation to the matters at issue. That latter finding is of

relevance for, even if the four year time limit does apply, that time limit is inoperative where the return of the tax payer concerned is

affected by fraud or neglect.

2.4 Thus the net issue which was before the High Court on the case stated was whether, on a proper construction of the Taxes Acts

as a whole, the formation of an opinion under section 811 is caught by the general time limitations contained in ss. 955 and 956 of

the TCA.

2.5 In order to understand both the reasoning by which Laffoy J. agreed with the overall conclusion of the Appeal Commissioner and

also the arguments made before this Court on that same issue, it is necessary to turn first to the relevant legislation. What follows is

an analysis of the legislation in the form which applied in 2007 being the time when Revenue sought to invoke section 811. I will first

examine section 811 itself.

3. Section 811

3.1 This Court has already given some consideration to section 811 in O’Flynn Construction v. The Revenue Commissioners [2011]

IESC 47. In that case O’Donnell J., giving the judgment of majority, said that

“…the essential starting point to the application of [s.811] is a determination that absent its provisions the taxation charge

would not apply, or in the case of an exemption, that its benefit would be available to the tax payer, on a literal construction

of the language of the relevant statute. Looked at in this light, sections 86(2) and 86(3) appear to be directed towards making

the difficult distinction between a commercial transaction which has been legitimately structured in such a way as to mitigate

the tax view on the one hand, and a purely tax driven transaction designed to give rise to a tax advantage on the other.”

O’Donnell J. was in that case dealing with the pre-cursor of section 811 (being, as already noted, s.86 of the Finance Act, 1988).

There have been some changes over time to the general anti-avoidance measures originally contained in s.86 of the Finance Act,

1988 and now to be found in section 811 but none of those changes are material to the issues which arise in this case.

3.2 However, this Court, in O’Flynn, was concerned with the application of the general anti-avoidance measure to the facts of that

case and did not have to deal in any great detail with the procedural measures which potentially are relevant to the issue which

arises in this case.

3.3 The question which requires to be answered here is not to do with whether the transaction in which Mr. Droog engaged was in

fact a tax avoidance transaction as defined in section 811 but rather whether the general time limit applies. It is, therefore,

appropriate to concentrate on those aspects of section 811 which are material to that question.

3.4 On that basis it is first necessary to turn to s. 811(2) which is in the following terms:-

“For the purposes of this section and subject to subsection (3), a transaction shall be a “tax avoidance transaction” if having regard

to any one or more of the following—

(a) the results of the transaction,

(b) its use as a means of achieving those results, and

(c) any other means by which the results or any part of the results could have been achieved,

the Revenue Commissioners form the opinion that—

(i) the transaction gives rise to, or but for this section would give rise to, a tax advantage, and

(ii) the transaction was not undertaken or arranged primarily for purposes other than to give rise to a

tax advantage,

and references in this section to the Revenue Commissioners forming an opinion that a transaction is a tax avoidance

transaction shall be construed as references to the Revenue Commissioners forming an opinion with regard to the transaction in

accordance with this subsection.”

3.5 As can be seen the structure of that subsection defines a tax avoidance transaction as being one where, having regard to the

various matters set out, Revenue form the relevant opinion. There follows subs.(3) which specifies certain circumstances in which

Revenue are not to regard a transaction as being a tax avoidance transaction which provisions are designed to attempt to achieve

the end noted by O’Donnell J. in O’Flynn being to exclude from the consequences of section 811 commercial transactions which have

been legitimately structured in such a way as to mitigate the tax due. In addition subs.(3)(b) provides for various matters which

Revenue should take into account in the formation of the relevant opinion.

3.6 Thus the combined effect of subss.(2) and (3) is to define a tax avoidance transaction by reference to an opinion formed by

Revenue on the basis of the criteria specified in those subsections.

3.7 It is next necessary to turn to subs.(4) which is in the following terms:-

“(4) Subject to this section, the Revenue Commissioners as respects any transaction may at any time—

(a) form the opinion that the transaction is a tax avoidance transaction,

(b) calculate the tax advantage which they consider arises, or which but for this section would arise, from the

transaction,

(c) determine the tax consequences which they consider would arise in respect of the transaction if their opinion

were to become final and conclusive in accordance with subsection (5)(e), and

(d) calculate the amount of any relief from double taxation which they would propose to give to any person in

accordance with subsection (5)(c).”

3.8 For the purposes of this case it is relevant to note that the section speaks of Revenue forming a relevant opinion “at any time”. It

can also be seen that subs.(4) provides, in addition to the power to form the opinion, that Revenue may calculate the relevant tax

advantage and determine the consequences which are to arise if the opinion is to become “final and conclusive” in accordance with

subs.(5)(e).

3.9 That latter subsection is in the following terms:-

“(e) For the purposes of this subsection, an opinion of the Revenue Commissioners that a transaction is a tax avoidance

transaction shall be final and conclusive—

(i) if within the time limited no appeal is made under subsection (7) against any matter or matters specified or

described in a notice or notices of opinion given pursuant to that opinion, or

(ii) as and when all appeals made under subsection (7) against any such matter or matters have been finally

determined and none of the appeals has been so determined by an order directing that the opinion of the Revenue

Commissioners to the effect that the transaction is a tax avoidance transaction is void.”

In substance, therefore, the opinion of Revenue that a transaction is a tax avoidance transaction becomes final and conclusive, and

the consequences specified come into operation, either where there is no appeal brought or where the result of any appeal is not

such as to entirely exclude any finding that the transaction concerned is a tax avoidance transaction. In passing it should be noted

that it is, of course, possible that an appellant might succeed in part (for example, in relation to the measures which should be put in

place to reverse the relevant tax advantage) but not succeed in entirely displacing the original opinion of Revenue. In such a case

the final result might be more favourable to the tax payer than would have been the case had the original view of Revenue prevailed

but nonetheless there would remain an adverse measure to be put in place so far as the tax payer was concerned.

3.10 For present purposes it seems to me that the key provisions are those contained in subs.(4) which provides that a relevant

opinion can be formed “at any time” and the definition of the time when the opinion becomes final and conclusive being the latter of

the expiry of the time limit for appealing or the determination of an appeal in a way which is not fully favourable to the tax payer. It

will be necessary to return to those provisions having given consideration to those aspects of the TCA which provide for the time limit

which is relevant to this appeal. I now turn to those provisions.

4. Part 41

4.1 Part 41 of the TCA (“Part 41”) is headed “Self Assessment” and is designed to deal with that aspect of the taxes regime which is

subject to self-assessment whereby a tax payer is required to make a return of all matters relevant to the calculation of the amount

of tax which ought be paid on foot of that return. It is important to have regard to the fact that the self-assessment regime does not

apply to all taxes or, indeed, to all tax payers in respect of certain taxes. In the context of the tax which is the subject of this

appeal, being income tax, it is, of course, the case that self-employed persons are generally subject to the self- assessment regime

whereas employees without significant outside income are subject to the PAYE system and not, therefore, subject to self-

assessment. What consequences those matters may have for this case is a question to which it will be necessary to return.

4.2 In any event it is important to start by noting one aspect of the interpretation section contained within Part 41 being s.950(2) of

the TCA which provides as follows:-

“Except in so far as otherwise expressly provided, this Part shall apply notwithstanding any other provision of the Tax Acts or

the Capital Gains Tax Acts.”

4.3 It is next necessary to note the basic scheme of Part 41. Section 951 TCA creates an obligation on all relevant persons to make a

return. Section 954(2) then provides that, subject to subs.(3), an assessment is to be made by reference to the particulars

contained in that return. There is, however, a saver which allows the inspector to make a separate assessment where the inspector

is not satisfied with the return or has information suggesting an insufficiency in the return. In other words, the default position is that

the inspector makes an assessment in accordance with the details set out in the return but the inspector does have the option of

departing from those details for good reason.

4.4 However, it is ss.955 and 956 of the TCA which are at the heart of the issue which arises on this appeal. Section 955(1) allows

an inspector “at any time” to amend an assessment notwithstanding that tax “may have been paid or repaid” in respect of the

assessment previously issued. The purpose of that provision would appear to be to ensure that a tax payer could not argue that the

fact that they had made a return and had paid tax in accordance with an assessment raised on foot of that return might mean that

their tax affairs for the fiscal period concerned were irrevocably finalised. However, s.955(1) is expressly stated to be subject to

subs.(2) which is in the following terms:-

“(2) (a) Where a chargeable person has delivered a return for a chargeable period and has made in the return a full and true

disclosure of all material facts necessary for the making of an assessment for the chargeable period, an assessment for that

period or an amendment of such an assessment shall not be made on the chargeable person after the end of the period of 4

years commencing at the end of the chargeable period in which the return is delivered and –

(i) no additional tax shall be payable by the chargeable person, after the end of that period of 4 years,

and

(ii) no tax shall be repaid to the chargeable person after the end of a period of 4 years commencing at

the end of the chargeable period for which the return is delivered,

By reason of any matter contained in the return.

b) Nothing in this subsection shall prevent the amendment of an assessment—

(i) where a relevant return does not contain a full and true disclosure of the facts referred to in

paragraph (a),

(ii) to give effect to a determination on any appeal against an assessment,

(iii) to take account of any fact or matter arising by reason of an event occurring after the return is

delivered,

(iv) to correct an error in calculation, or

(v) to correct a mistake of fact whereby any matter in the assessment does not properly reflect the

facts disclosed by the chargeable person,

and tax shall be paid or repaid where appropriate in accordance with any such amendment, and nothing in this section shall

affect the operation of section 804(3).”

The substance of that provision is to protect a tax payer who makes a “full and true disclosure” of all relevant “facts”. In such a case

no further assessment can be made after the relevant four year period and, importantly, no additional tax is to be paid and no tax is

to be repaid by reason of any matter contained in the return. There are, of course, the exceptions contained in subs(b) but none of

these apply in the circumstances of this case.

4.5 It is easy to understand the reasoning behind that provision. Where a tax payer has made a “full and true” disclosure of all

relevant facts, the Oireachtas must have considered that it would have been significantly unfair to allow Revenue to reopen the

amount of tax due after the relevant four year period. It is also of some relevance to note the provisions of subs.(4) which allows for

the expression of doubt where a tax payer is unsure as to the law in any particular relevant regard but makes a return to the best of

their ability while expressing doubt. Unless that expression of doubt is found to be ungenuine then the person will be regarded as

having made a “full and true disclosure” even though it may turn out that their view of the law was wrong. Thus a person who makes

an incorrect return, but expresses what is found to be a genuine doubt, will be held to have made an appropriate return thus

triggering the time limit but, equally importantly, that facility cannot be abused by ungenuine expressions of doubt.

4.6 Section 956 is also of relevance. Section 956(1)(b) allows an inspector to make inquiries or take action necessary to verify the

accuracy of a return. Section 956(1)(b)(ii) allows the inspector, presumably as a result of discoveries which might arise from such

inquiries or actions, to amend an assessment but, importantly, that power is expressly stated to be subject to s.955(2) to which

reference has already been made and which provides for the time limit. Consistent with that provision is subs.(3) which imposes a

time limit on inquiries and actions outside the four year period unless the inspector has reasonable ground “for believing that the

return is insufficient due to its having been completed in a fraudulent or negligent manner”.

4.7 Thus again the structure is clear. A person who makes a full and true disclosure and pays their tax on foot of an assessment

raised thereon cannot have their tax affairs reopened after four years have elapsed. An inspector is given wide power to inquire into

the accuracy of any return but is precluded from engaging in such inquiry outside the four year period unless the inspector has

reasonable grounds for believing that the original return was fraudulent or negligent and thus not a full and true disclosure. An

inspector is not, therefore, entitled to engage in a purely “fishing” exploration of whether old returns (i.e. returns more than four

years previous) were inaccurate but rather is required to have some reasonable basis for considering that the return was fraudulent or

negligent before embarking on inquiries. Section 956(2)(a) allows a tax payer who feels that an inspector is making inquiries outside

the time limit in circumstances not permitted to appeal to the Appeal Commissioners.

4.8 It follows that, at least in general terms, ss.955 and 956 are designed to prevent the reopening of the tax affairs of a tax payer in

respect of the types of tax covered by Part 41 outside of a four year period except in circumstances where the original return was, or

was reasonably suspected to be, fraudulent or negligent. Even if such a reasonable suspicion exists no ultimate exposure to adverse

tax consequences can be placed on the tax payer concerned unless it is ultimately established that the relevant return was in fact

not full and true in its disclosure.

4.9 Against the backdrop of those legislative provisions it is next necessary to turn to the judgment of the trial judge.

5. The High Court Judgment

5.1 In reaching her conclusion the trial judge took into account a number of factors. First, having analysed the Taxes Acts generally,

she came to the conclusion that it was reasonable to infer that the opinion of the Nominated Officer, of which notice was given on

the 22nd February, 2007, must have been preceded by inquiries which took place outside the limitation period stipulated in ss.955

and, in particular, s.956. Next the trial judge took the view that certain issues, to which it will be necessary to refer in due course,

raised on behalf of Revenue concerning the length of time which it might take for a relevant opinion under the section to become final

and conclusive in the event of appeals, could not have a bearing on the proper construction of section 811 in the context of the TCA

as a whole. In relation to a further argument raised by Revenue, again dealt with later in this judgment, concerning the fact that a

section 811 opinion, in and of itself, does not give rise to any additional tax liability, the trial judge came to the view that the opinion

and notice thereof amounts to the commencement of a process which may give rise to the tax payer being liable for additional tax

and that the raising of the opinion is, therefore, potentially affected by the time limits set out in ss.955 and 956. The trial judge did

note s.140 of the Finance Act, 2008, which amended section 811 by expressly excluding the effect of s.955(2)(a) and s956(1)(c) on

inquiries or actions taken in connection with section 811. However, the trial judge noted that this Court had, in Cronin (Inspector of

Taxes) v. Cork and County Property Company Limited [1986] I.R. 559, held that a subsequent amendment can at best be neutral in

the context of the interpretation of the relevant legislation in its pre-amendment form and cannot be used to construe the statute as

it was before the amendment in question. In other words the fact that an undoubtedly express exclusion of the time limit in respect of

section 811 has been introduced by the 2008 Finance Act cannot affect one way or the other the question of whether, on a proper

interpretation, the time limit applied prior to that amendment. It should be noted that there did not appear to be any disagreement at

the hearing of the appeal but that the trial judge was correct in her approach on that point.

5.2 Ultimately the trial judge came to the view that the wording of section 811 was not sufficient to give rise to a disapplication of

the time bars stipulated in ss.955 and 956 for the purposes of section 811 and that the words “at any time” in s.811(4) do not have

the effect of displacing the primacy given by s.950(2) to the provisions of Part 41.

6. Suggested Anomalies

6.1 Before going on to consider the proper construction of the relevant provisions of the TCA, it is necessary to say something about

aspects of the argument put forward at the appeal before this Court on behalf of Revenue including an argument which was based on

the undoubted fact that the time limit provided for in Part 41 of the TCA does not apply in all cases in respect of which an opinion

under section 811 might be formed. Section 811 applies to all tax payers and to all taxes. Part 41 of the TCA applies only to income

tax, corporation tax and capital gains tax. It does not apply to capital acquisitions tax, stamp duties or value added tax.

6.2 Likewise, Part 41 only applies in respect of income tax to those persons who are subject to the self-assessment regime and does

not apply to person in employment whose tax is deducted under Schedule E being the PAYE system.

6.3 In substance, counsel for Revenue submitted that the Court should have regard to what were argued to be the anomalies which

would flow from the Court adopting the interpretation which found favour both before the Appeal Commissioner and the High Court.

That interpretation, it was argued, would have the effect of imposing, in practice, a four year time limit on the operation of section

811 in the case of self-assessed persons in relation to income tax, corporation tax and capital gains tax only and would have no

application to persons or bodies who are either within the PAYE system or had liabilities in respect of other taxes such as value added

tax or capital acquisitions tax.

6.4 There is no doubt but that the argument in question is correct so far as it goes. However, it must also be taken into account that

the application of the time limit contained in particular in s. 955 has been chosen by the Oireachtas to apply to the cases governed

by Part 41 without including an identical or similar provision in respect of those taxes and persons who do not come within the ambit

of Part 41. The Oireachtas has doubtless chosen to make such a distinction between certain taxes and certain tax payers for good

reason. If, therefore, it should transpire that the proper construction of the combined effect of section 811 and s.955 is as the High

Court found it to be then any uneven application of the time limit would simply be a function of the fact that the Oireachtas has

chosen to impose a general time limit in some cases but not impose a similar general time limit in other cases. As I suggested there

may well be good reasons for that choice. It might, for example, be felt that it was most unlikely that circumstances would arise

which would require revisiting the liabilities of a PAYE tax payer unless there was some fraud or negligence in the way in which that

tax payer had come to be taxed. Be that as it may the Oireachtas has made a choice in imposing a time limit in some cases and not

imposing a time limit in other cases. Given that such a distinction applies across the board it does not seem to me that any great

weight can be attached to the fact that the general distinction concerned might also apply differentially in the case of section 811.

6.5 Furthermore, it seems to me that, if it is necessary to look at the broad purpose of the legislation as a whole, it is also necessary

to take into account the consequences of Revenue being correct in their interpretation. It must be recalled that the time limit only

applies in the case of a tax payer who has made full and true disclosure without fraud or negligence. For shorthand I will refer to a

return which meets those requirements as being a fully compliant tax return. If the construction which Revenue seeks to place on the

Taxes Acts as a whole is correct then it follows that a tax payer who has in fact made a fully compliant return and paid the tax

assessed on the basis of that return can have their tax affairs revisited at any time into the future. This can be so without any

assessment as to the circumstances giving rise to the lapse of time between that fully compliant return and the implementation of

section 811 by means of serving a notice containing the relevant opinion. It is true, of course, that the legislation (s.811(b)(a)) does

require Revenue to immediately notify a tax payer as soon as the relevant opinion has been formed. But the legislation does not say

anything about the time which may elapse in the formation of such an opinion. Conferring an entirely open ended entitlement on

Revenue to revisit the tax affairs of persons who have made fully compliant tax returns, at potentially a very great remove from the

time when such returns were made, would itself give rise to potential unfairness.

6.6 In saying that I would wish to strongly emphasise that those comments are made solely in the context of a case where a tax

payer has made a fully compliant return. They could have no application where the tax payer has given incomplete or incorrect

information to Revenue. But there is nothing in the legislation, on the interpretation which Revenue urges, which limits the time for the

formation of a section 811 opinion in any way. Could it really be the case that Revenue could revisit the consequences of a fully

compliant tax return, and an assessment made and paid as a result thereof, 30 years after the event? On the basis of the

construction which Revenue urges there would not seem to be any obvious statutory barrier to such a course of action.

6.7 However, in any event, the starting point has to be the wording of the legislation itself. I, therefore, turn to that issue.

7. The Legislation

7.1 On one view the question comes down to a very net one. Part 41, by virtue of s.950(2), is stated to override any other provision

of the Tax Acts or the Capital Gains Tax Acts “except insofar as otherwise expressly provided”. Section 811(4) TCA says that

Revenue may form the relevant opinion for the purposes of the section “at any time”. The question is as to whether that later

provision, specifying that the opinion may be formed “at any time”, is a sufficient express exclusion of the operation of the time limits

contained in Part 41 to meet the requirement in s.950(2) that there be an express contrary provision.

7.2 There was some debate at the hearing as to whether there could be an express contrary provision which did not actually mention

Part 41 or any specific provision of same such as ss.955 and 956. It does not appear to me that there is an absolute requirement that

there be a specific mention of the fact that Part 41 or any aspect of it is being expressly disapplied once the language of the relevant

other aspect of the Taxes Acts is sufficiently clear to make it obvious that a particular provision of Part 41 is being disapplied.

7.3 Before considering the net question just posited it is appropriate to deal with certain other arguments which suggested that the

issue was not only concerned with what might, on one view, be considered to be a conflict between section 811 and section 955.

One such argument was to the effect that the opinion formed under section 811 does not, in and of itself, amount to the raising of

tax or an assessment to tax. This is said by counsel for Revenue to be so for two reasons. First, the opinion does not give rise to any

consequence unless and until it becomes final and conclusive. Second, it is said that, even if and when the opinion becomes final and

conclusive, the tax consequences do not necessarily involve the raising of an additional assessment such as might be said to be

contemplated by section 955.

7.4 However, the wording of s.955(2) as it stood in 2007 is clear. Section 955(2)(a)(i) says that no additional tax shall be payable by

the chargeable person after the end of the relevant four year period. That provision is expressed in clear and unambiguous terms. It is

in addition to the prohibition on raising further assessments. The section clearly prohibits the imposition of any additional tax burden

outside the four year period in the case of a person who has made a fully compliant return. It is quite clear that the purpose of the

Revenue opinion in this case, if it were to become final and conclusive, would be, by whatever means, to impose an additional burden

on Mr. Droog to pay tax. He would be required to pay the sum of IR£24,022 which he saved by virtue of the losses attributable to

Taupe Partners being allowed for the purposes of the calculation of his tax when originally assessed. The only reason for a section

811 opinion is to initiate a process leading, from Revenue’s perspective, to a requirement to pay that money in some form. It is

designed to ensure that Mr. Droog pays more tax. If section 955 is not expressly excluded by s.811(4) then the requirement to make

Mr. Droog pay that additional tax, which was the sole ultimate purpose of the opinion, would be expressly prohibited. There is no point

in a section 811 opinion if the consequences of that opinion cannot be put into effect because they breached section 955. It seems

to me that, again, the issue narrows to whether the wording of s.811(4) is sufficient to provide for an express exception to section

955.

7.5 Another suggestion from Revenue drew attention to the fact that the liability to pay any sums which may become due as a result

of an initial opinion under section 811 does not crystallise until such time as the appellate process has been completed. It is pointed

out, and the courts are painfully aware of the fact, that the taxation appellate process frequently takes a very great deal of time.

Indeed, this case itself is by no means a bad example although it is far from the worst case which the courts have encountered. On

that basis it is said that it could not have been intended by the Oireachtas that s.955 would apply to a section 811 opinion because

there would have been a very great risk that a section 811 opinion (even if speedily given) would not become final and conclusive,

thus giving rise to an obligation to make a payment, within the four year period having regard to the appeals which the legislation

allows.

7.6 Obviously what s.955 prohibits is an obligation to pay tax arising outside the four year time limit in those cases to which the

section applies. The problem stems from a distinction between the way in which the ordinary system works in comparison with the

way in which section 811 operates. In ordinary cases the raising of an assessment gives rise to an obligation to pay the tax or

additional tax assessed subject only to the fact that, in certain cases, that obligation may be postponed or ultimately removed as a

result of the appellate process. Section 811 works differently. No obligation to pay additional tax arises under section 811 unless and

until the relevant opinion becomes final and conclusive which point of time can only be reached when any appellate process invoked

has been exhausted. There is, thus, a difference between the point in time when tax becomes initially due as a result of the raising of

an assessment, on the one hand, or as a result of the forming of a section 811 opinion, on the other. That difference in time could, of

course, have a significant effect if s.955 operates to preclude the charging of extra tax in certain cases under section 811 outside

the four year period because the charging of the tax under section 811 does not occur until after the appellate process has been

exhausted.

7.7 The practical consequences are, indeed, as counsel for Revenue suggested. There may very well be a problem. But it does not

seem to me that that problem can legitimately lead to construing the legislation in a way which its wording does not allow. If the

proper construction of the Taxes Acts leads to section 811 being governed by the time limits in Part 41 then the answer to that

problem would have been to make an express provision in section 811 which stopped time running, for the purposes of s.955, as soon

as notice of the relevant opinion was given. Such a regime could not be criticised in any way as being unfair for the tax payer would

know that his or her affairs for the relevant tax year were under challenge, notwithstanding a fully compliant return, within the four

year period. It seems to me to follow that the fact that there might be practical difficulties, which could have been capable of

another solution, could not alter the proper construction of the legislation if it is not possible to say that section 811 (4) expressly

disapplies the time limit contained in Part 41.

7.8 For all of those reasons it seems to me that the issue does indeed come down to a very net one. Does the use of the phrase “at

any time” in s.811(4) amount to a sufficiently clear and express exclusion of the time limits set out in s.955 so as to disapply those

time limits in the context of a section 811 opinion.

7.9 There are, perhaps, two aspects to that question. The first concerns the terms of s.950(2) of the TCA, which requires an express

provision in order to dis-apply Part 41 from any other aspect of the Taxes Acts. The second concerns the use of the phrase “at any

time” in section 811 itself.

7.10 In my view, the use of the phrase “as otherwise expressly provided” in s.950(2) requires that any dis-application of the

provisions of Part 41 must be in clear and unambiguous language. It is important to recognise that s.950 does not merely require that

it be “otherwise provided” but goes on to require that any such provision must be express. It certainly follows that there cannot be

an implied exclusion of the effect of Part 41. Likewise it seems to me that an unclear or potentially ambiguous or debatable potential

dis-application provision could not meet the requirement that it be stated in express terms. That leads to the question of whether the

use of the phrase “at any time” in section 811 can meet that test.

7.11 The first matter to be addressed in that context concerns the meaning to be attached to the phrase “at any time”. Obviously a

court faced with a requirement to interpret legislation is required to lean heavily against the view that language has been included in

legislation for no purpose. If the phrase “at any time” could not be said to give rise to any meaning other than to dis-apply the time

limits specified in Part 41 then it might be very difficult to argue that the phrase did not amount to an express dis-application.

However, it seems to me that there are other potential meanings of the phrase “at any time”.

7.12 As I already noted at para. 4.4 of this judgment, the phrase “at any time” also appears in s.955(1) of the TCA which provision

allows an inspector to amend an assessment notwithstanding that tax may have been paid or repaid in respect of a previous

assessment for the relevant period and, importantly, allows such an amendment to take place “at any time”. As I suggested earlier

the use of that phrase in that context may well have been designed to exclude the possibility that a taxpayer might argue that, by

making a return, having an assessment raised based on that return and having paid tax based on that assessment, the relevant tax

affairs of the taxpayer concerned for the fiscal period in question were irrevocably finalised. It is, of course, the case that s.955(1) is

itself qualified by the provisions concerning time limits which have already been detailed.

7.13 A like analysis can, I think, be applied to the use of “at any time” in section 811. It will almost invariably follow that an opinion

under section 811 will be issued after a taxpayer has made a return, had an assessment raised and paid tax. It seems to me that the

phrase “at any time” is designed to ensure that a taxpayer could not argue that his or her tax affairs for the relevant period had been

irrevocably finalised by the payment of all taxes said to be due as a result of that process. On the contrary it is clear that, just as

applies in relation to s.955 in respect of assessments, completed tax affairs can be re-opened under section 811 notwithstanding the

earlier payment in full of the tax which Revenue initially asserted as being due. It is to that end that the phrase “at any time” is used.

7.14 But just as the phrase “at any time”, when used in respect of re-opening assessments in s.955, can be and is overridden by the

time limits contained in Part 41 there is no reason why the identical phrase “at any time”, as used in section 811, cannot similarly be

overridden by the time limits in Part 41. It is true that, unlike s.950, section 811 does not contain an express stipulation that it is

subject to those time limits. However, the very fact that those time limits require to be expressly dis-applied in order for them not to

apply means that it was not necessary (because of s.950) that there be an express provision in section 811 dis-applying those time

limits. Rather there was required to be an express provision in section 811 dis-applying Part 41 or the time limits contained in it. It

does not seem to me, therefore, that the phrase “at any time” amounts to the sort of clear and unambiguous dis-application of the

Part 41 time limits that s.950 requires.

8. A Final Observation

8.1 The trial judge found that the raising of an opinion outside of the relevant four year time limit was first a breach of the

requirement in Part 41 that a taxpayer should not become liable to pay more tax outside that four year time limit (provided that the

taxpayer had made a fully compliant return) but also, by inference, involved the making of enquiries which were made outside the time

limits provided in that regard by s.956(3). In my view it is unnecessary to consider whether that latter finding was correct.

8.2. As pointed out earlier the only purpose of the raising of a section 811 opinion is to potentially give rise to a situation where a

taxpayer’s affairs are re-opened and the taxpayer will become liable to pay more tax if the relevant opinion becomes final and

conclusive. Section 955 expressly excludes any such payment outside the four year time limit. The raising of an opinion whose only

end can be to require the payment of additional tax in circumstances where such additional payment is prevented by the time limits

contained in Part 41 is clearly impermissible. To start a process which can have no lawful conclusion must itself be legally

impermissible. In those circumstances I would confine myself to expressing the view that the time limit provisions contained in Part 41

are not dis-applied by sufficiently clear and unambiguous language in section 811. It is unnecessary to express any view on whether

the investigative time limits necessarily affect the raising of the opinion in this case.

9. Conclusions

9.1 For the reasons analysed in this judgment I am, therefore, persuaded that the trial judge was correct to conclude that the time

limits contained in s.955 of the TCA apply in the case of section 811 and are not dis-applied by any sufficiently clear and

unambiguous language in that section. As the only purpose of the raising of an opinion under section 811 in this case would be to

require Mr. Droog to pay additional tax and as the obligation to pay any additional tax which might become payable as a result of the

Nominated Officer’s opinion becoming final and conclusive would necessarily arise outside the four year time limit, the commencement

of that process by the raising of the opinion in question can have no lawful objective. It must, therefore, itself be regarded as being

legally impermissible.

9.2 In those circumstances I would dismiss the appeal.