Directors of tax-row building firm must pay costs
A BUILDING company and its two directors will have to pay substantial costs of court proceedings over a "highly artificial" tax avoidance scheme, the Supreme Court has ruled.
Cork-based O'Flynn Construction Ltd (OFC) and its directors Michael and John O'Flynn, of Kilcrea, Ovens, Co Cork, lost a battle taken all the way to the Supreme Court in which the tax scheme -- whereby the two received IR£600,000 (€762,000) in tax-free dividends -- was disallowed.
The court ruled yesterday the men and their firm must pay the costs incurred by the Revenue in fighting the case in the High Court while each side pays their own costs in the Supreme Court.
By a three/two majority last December, the court had dismissed the O'Flynn appeal against a High Court ruling disallowing the scheme after finding it was a tax-avoidance transaction involving a misuse of export sales tax reliefs.
Giving the majority judgment, Mr Justice Donal O'Donnell said the scheme, operated between December 1991 and January 1992, was "highly artificial" and contrived.
It involved profits of OFC, which would attract tax if distributed to shareholders, being paid by a "circuitous route" to those shareholders without attracting tax, he said.
The case involved important findings on the meaning of Section 86 of the Finance Act 1989 -- the only anti-avoidance measure in Irish law described by the court as "of mind-numbing complexity", the court said.
Giving the five judge court's ruling, Mr Justice Nial Fennelly refused the O'Flynns' application for costs in both the High and Supreme Court, saying the High Court costs order must stand.