Johnny Ronan firm had hoped to share in €6.2m tax saving
THE Medical Council and a company of developer Johnny Ronan stood to make a tax saving of around €6.2m between them had they been able to complete the sale of the council's new landmark headquarters in Dublin in 2007, the Commercial Court heard.
However, because of the law at the time, the council had to instead lease the Kingram House building, off Fitzwilliam Square, from Mr Ronan's company at an annual rent of €820,000.
Now the council and Mr Ronan's company, Tanat, are in a court battle over whether that rent can be reviewed on an upward-only basis or can be cut to as little as €320,000 per annum.
Tanat, whose directors are Mr Ronan and Peter Conlan, say the council is bound by an agreement it reached in 2007 to lease the building which provided for upward-only rent reviews.
Tanat was a part of Mr Ronan's portfolio of companies that was completely separate from the now liquidated developers, Treasury Holdings, which he founded with Richard Barrett, the court heard. The council says it has the benefit of a new law introduced in 2009 (Land and Conveyancing Law Reform Act) banning upward-only rent review clauses in leases.
Tanat says that new law is not retrospective and does not apply in this case as it relates to an agreement entered into before the new Act was passed.
It also claims that the lease arrangement was only entered into to allow the council to move into the building until such time as the council got new powers from the government to allow it to buy the building for €20m in the most tax-efficient way or, alternatively, to rent it under a longer term lease.
Opening Tanat's case yesterday, barrister Declan McGrath said the Medical Council sought to take over Kingram House, a protected structure, in anticipation of moves by the Government in 2008 to expand its statutory role including providing facilities for disciplinary inquiries to be held in public.
The parties agreed the most tax-efficient way to do this was by the council buying the shares in Tanat.
Doing it in this way, rather than through a simple sale of the property, meant Tanat would not have to pay €2.7m in capital gains tax while the council would not have to pay €3.45m in stamp duty and VAT, a total saving between both parties of just under €6.2m, the court heard.
The case before Judge Iarfhlaith O'Neill continues.