The Finance (Tax Appeals) Act 2015 (the Act) was enacted on 25 December 2015 to bring into effect the long awaited reform of the tax appeals system. The provisions of the Act are due to come into effect on a day appointed by the Minister for Finance. The necessary statutory instruments were issued on 26 February appointing 21 March 2016 as the day from which the provisions of the Act will take effect.
The main function of the Act is to provide for the establishment of the Tax Appeals Commission, the body which will replace the office of the Appeal Commissioners, and to replace Part 40 of the Taxes Consolidation Act, 1997, with a new Part 40A which sets out in detail the appeals process including the making of appeals and the conduct of hearings.
Tax Appeals Commission
With effect from 21 March 2016 the functions of the Appeal Commissioners will be taken over by a corporate body known as the Tax Appeals Commission (referred to as “the Commission” in the Act). Part 2 of the Act sets out the functions of the Commission, how its members are to be appointed and how their terms and conditions are to be determined.
The membership of the Commission will be determined by the Minister for Finance (the Minister) and each member will be known as an Appeal Commissioner (referred to a “Commissioner” in the Act). The Commission will be a body corporate and the Act does not specify a minimum or maximum number of Commissioners. The Minister will request the Public Appointments Service to assess and select candidates and recommend persons for appointment.
The intention is that the new body dealing with appeals should be seen as an independent of the Revenue Commissioners and should act and should be seen to act in an impartial manner. With this aim in mind, the Act provides that Commissioners when first appointed must make a declaration before a Peace Commissioner that they will execute their powers and authorities vested in them as an Appeal Commissioner impartially and honestly and will judge and determine all matters brought before them without favour or affection. The Act also provides that the Commission and its members should be independent in performing their functions and that a Commissioner should not take part in an adjudication or determination if it is a matter in which the Commissioner is interested in his or her own right. Furthermore a Commissioner may not hold any other paid office or employment or carry on a trade, business or profession.
The functions of the Commissioners are set out in the Act and include:
• Deciding whether to accept an appeal
• Deciding whether to declare that a refusal to accept an appeal is final
• Deciding on the appropriate procedure to be adopted in relation to the adjudication of an appeal
• Giving directions to the parties to an appeal
• Fixing dates, times and places for hearing appeals
• Hearing appeals
• Determining appeals
• Providing written determinations
• Publishing determinations
• Stating and signing cases stated for the opinion of the High Court
As you will see below, the Act provides a mechanism whereby disputes between appellants and Revenue can be resolved without a hearing and with this in mind one of the functions of the Commissioners is to do “other things as they consider conducive” to the resolution of disputes between Revenue and Appellants and to establish the correct liability to tax of appellants. Any rules of procedure adopted by the Commissioners must be published.
The term of office of a Commissioner is full-time and cannot exceed 7 years. However a Commissioner can be appointed to serve a second term. The Minister can remove a Commissioner from office but must state the reasons for the removal and lay a statement before the Dáil giving reasons for the removal. Reasons for removal include, but are not limited to, ill health, conflicts of interest or where it is necessary for the effective performance by the Commission of its functions.
The Commission is required to provide annual reports to the Minister copies of which will be laid before the houses of the Oireachtas.
New Part 40A Taxes Consolidation Act 1997
The main aim of the reform of the appeals system was to provide for a system for appeals which was independent of the Revenue Commissioners. Under the pre 21 March 2016 system of appeals (the old system), a taxpayer who wished to make an appeal to the Appeal Commissioners had to do so by giving notice to Revenue. Revenue were then entitled to refuse notice to appeal and the taxpayer then had to appeal this refusal to the Appeal Commissioners. One of the key changes under the new system is that appeals no longer need to be made through Revenue and instead will be made directly to the Appeal Commissioners.
A further aim of the reform of the appeals systems was to provide for a more transparent and efficient system. With this in mind, the new Part 40A contains 48 sections (compared with 19 in Part 40) which set out how appeals are to be made, how hearings are to be conducted, the powers and functions of the Appeal Commissioners in relation to hearings and also pre-hearings, and how determinations are to be dealt with. A lot of the procedures are the same as under the existing appeal system and differences between the old and new systems are set out below. However the major differences are as follows:
(1) Appeals will be made directly to the Appeal Commissioners rather than through Revenue
(2) Appeals may be settled by the Appeal Commissioners without the holding of a hearing in certain circumstances
(3) Decisions of the Appeal Commissioners must be published
(4) A taxpayer no longer has the right to request a rehearing before the Circuit Court
The new Part 40A contains seven chapters.
Chapter 1 – Interpretation and General
As the name indicates, this chapter contains the definitions for Part 40A and sets out the general provisions relating to the entire appeal system e.g. the delegation of the functions of the Revenue to its officers, the ability of an appellant to appoint another person to act as their agent in relation to an appeal. The chapter also contains provisions allowing the Revenue and the Appeal Commissioners to put in place arrangements so that any of the functions to be done, and any documents or notifications to be provided, in relation to the appeals system can be done by electronic means.
It is provided that an Appeal Commissioner can issue directions in relation to the conduct or disposal of an appeal including directions on the following issues:
• Requiring the submission of documents, statements, accounts, returns computations, explanations, particulars, records, certificates, declarations, schedules and other information they consider relevant to the appeal
• Consolidating or hearing together two or more appeals
• Staying proceedings
• Holding preliminary hearings
• Adjourning a hearing
• Extending the time within which a direction must be complied with
Under Part 40 an Appeal Commissioner had the power to issue precepts requiring the submission of further information by the appellant. Now however the legislation allows the Appeal Commissioners to issue a direction to either party to the appeal. Furthermore either party can request an Appeal Commissioner to issue a direction. Where a direction is issued notice must be sent to both parties. Under the old system Revenue had the power to object to a schedule provided by the appellant under a precept. Under the new system either party may object to the issue of a direction. If a party fails to comply with a direction to provide further information/documentation the Appeal Commissioners may dismiss the appeal. They are not however required to dismiss the appeal and may decide to determine the appeal without the additional information/documentation requested.
As under Part 40, an appellant may withdraw his or her appeal but under the new system the notice of withdrawal is sent to the Appeal Commissioners rather than to Revenue. Also the Appeal Commissioners are required to provide an opportunity to the parties to settle matters under appeal by agreement, to avoid undue formality and to adopt a flexible approach in relation to procedural matters.
Chapter 2 – Making and Accepting Appeals
Under the new system a taxpayer can make an appeal directly to the Appeal Commissioners instead of having to do so by notifying Revenue that they wish to make an appeal. At present Revenue have the right to refuse such an appeal. Under the new system because the appeal will be made directly to the Appeal Commissioners, Revenue have no right to refuse an appeal. The Appeal Commissioners must send a copy of the notice of appeal to Revenue and Revenue can object to the making of the appeal, within 30 days, if they consider the appeal is not a “valid” appeal or, in the case of a late appeal, if the conditions necessary to make a late appeal have not been satisfied. An appeal is a “valid appeal” if it is an appeal in respect of any matter for which an appeal is authorised under the Taxes Acts and if the conditions necessary for making the appeal have been satisfied. For example an appeal against an income tax assessment would be a valid appeal if a return has been filed for the relevant period and tax due in accordance with the return filed has been paid. The Appeal Commissioners can refuse an appeal if they are satisfied it is not a valid appeal or they are satisfied that the appeal is “without substance or foundation”.
As under the old system, the notice of appeal must set out the grounds for the appeal in detail and a party to the appeal is not entitled to rely on any ground of appeal that is not specified in the notice of appeal unless the Appeal Commissioner are satisfied that the grounds could not reasonably have been stated in the notice. As in the old system, there are provisions for making a late appeal where absence, sickness or other reasonable cause prevented the appellant from lodging an appeal on time.
Chapter 3 – Pre-hearing proceedings
The Appeal Commissioners can issue a direction to any party setting out the information to be provided by the party, referred to as a “statement of case”. The information which may be required to be set out is similar to what would be required to be set out in form AH1 under the current system and may include the following:
• The statutory provisions being relied on
• An outline of the facts
• The relevant case law
• A list of and copies of written material which will be relied on
• Brief particulars in relation to witnesses which may be called
• An estimate of the time required for a hearing
• Whether the party assents to the Appeal Commissioners determining the appeal without a hearing
• Whether the party wishes the hearing or part of it to be held in camera
• Whether the party considers that the matter could be settled by way of agreement without a hearing
• Any other information the Appeal Commissioners consider relevant.
A party who sends a statement of case to the Appeal Commissioners must send a copy to the other party. The Appeal Commissioners may also give a direction to one party requiring them to set out the arguments they will make at the hearing. This direction must however be given to both parties unless there are substantial grounds for giving it to just one party.
An Appeal Commissioner can give a direction for parties to attend a “case management conference” to review the conduct of proceedings, to clarify matters and to enable the Appeal Commissioners to provide all directions necessary for proceedings to be conducted in an expeditious and fair manner. The direction to attend such a conference may be given to just one party and does not have to be given to both parties. The appeal can be determined by the Appeal Commissioners at or following a case conference with the consent of both parties in which case a hearing does not have to be held.
It is not always necessary for an appeal to be adjudicated on by holding an appeal hearing. The Appeal Commissioners can adjudicate on a matter by considering written evidence, holding discussions with a party or by any other means they consider appropriate. The Appeal Commissioners must notify the parties of their intention to adjudicate without holding a hearing however either party may in such circumstances request a hearing within 21 days of receiving such a notification. As under the old system, an appeal may be settled by agreement between the parties before a hearing. The Appeal Commissioners may at any stage stay proceedings to give the parties the opportunity to settle the hearing.
Chapters 4 and 5 – Hearings and determinations
One of the key changes in this area is that the Act provides initially that every hearing of an appeal shall be held in public. However as an appellant can apply for a direction, within 14 days of receiving the notice of the time for a hearing, that a hearing should be held in camera, in practice an appeal will only be held in public if the appellant wants it to be held in public or in error does not make such a request within the necessary time period.
Even if the appellant does not request the hearing to be held in camera, the Appeal Commissioner can give a direction that it should be so held where:
• It is in the interests of public order or national security
• To avoid serious harm to public interest
• To maintain the confidentiality of sensitive information
• To protect an individual’s right to respect for his or her private and family life or
• In the interests of justice
The Appeal Commissioners are entitled to exclude from a hearing persons whose conduct they consider is disrupting or will disrupt an appeal, whose presence is likely to prevent a person from giving evidence freely, whose attendance would defeat the purpose of the hearing or who is under 18. They may also exclude witnesses until they are required to give evidence. As under the old system, if an appellant, or his agent, does not appear at a hearing the appeal is dismissed unless the Appeal Commissioners are satisfied that the appellant was prevented from appearing due to absence, illness or other reasonable cause. A barrister, solicitor or member of an accountancy body, the Irish Auditing and Accounting Supervisory Authority, the Irish Taxation Institute or the Law Society of Ireland, or other person the Appeal Commissioners consider appropriate, is entitled to speak on behalf of a party.
The Appeal Commissioners may require a person who is to give evidence to swear an oath and may admit evidence whether or not the evidence would be admissible in proceedings in a court in the State or exclude evidence which would otherwise be admissible where the evidence was not provided in time, in a manner which did not comply with a direction or which they consider would be unfair to admit.
As under the old system, the Appeal Commissioners may make their determination orally at the conclusion of a hearing but a written notice of their determination must be issued within 21 days of making their determination. If more than one Appeal Commissioner adjudicates on an appeal three must adjudicate as a decision must be by majority. The notification of their determination must set out the following:
• The determination
• A statement of their material findings of fact
• A statement of the reasons for the determination
• The name of the appellant and
• The date the determination was made
In adjudicating on an appeal the Appeal Commissioners are entitled to take account of previous determinations given by them on an appeal that raised common or related issues. They may if they consider it appropriate, in light of those previous determinations, determine the current appeal without holding a hearing. If they do not wish to hold a hearing they are required to send copy of the previous determination on the appeal that raised common or related issues, anonymised where the previous appeal was in camera, and request that the parties respond within 21 days saying if the party wants a hearing to be held and if they do, setting out the reasons why such a hearing is necessary or desirable and why the previous determination should be disregarded. However the Appeal Commissioners are not required to hold a hearing despite the objections raised by parties.
Another important difference in the new system of appeals relates to the requirement to publish determinations. Under the old system the Appeal Commissioners could make arrangements for the publication of such determinations which they considered appropriate. Since 1998 when the ability to publish determinations was first provided for, only 34 determinations have been published. Under the new system the Appeal Commissioners are required to publish a report of their determinations on the internet within 90 days of notifying the parties of their determination. They can issue one report for appeals with common or related issues. Unless the hearing was held in camera the names of the appellants will be published.
Chapters 6 and 7 – Appealing determinations, penalties and sanctions
As under the old system, either party to an appeal who is dissatisfied with a determination as being erroneous on a point of law is entitled to require the Appeal Commissioner to state and sign a case for the opinion of the High Court. The request must be made in writing within 21 days of the notification of the Appeal Commissioners determination. There is no longer the requirement for the party to “immediately” after the determination of an appeal, declare their dissatisfaction with the Appeal Commissioners determination. The Appeal Commissioners must complete and sign the case stated within three months after receiving the notification from the party wishing to appeal.
An appellant no longer has the entitlement to require a rehearing of the appeal before the Circuit Court.
The High Court may send the case back to the Appeal Commissioners for amendment. The decision of the High Court may be appealed to the Court of Appeal.
As under the old system, a penalty of €3,000 may be charged on a person who fails to comply with a summons to attend a hearing.
The Act contains transitional provisions to deal with appeals which have been notified to Revenue prior to the commencement date (21 March 2016). Where a taxpayer has given notice of an appeal to Revenue and the appeal has not been refused or if it was refused but the refusal was appealed to the Appeal Commissioners and allowed, then it is treated as an appeal made under the new system.
If before 21 March notice of appeal has been given to Revenue and they have refused the appeal and the refusal to accept the appeal has been appealed to the Appeal Commissioners, then the old provisions apply i.e. the Appeal Commissioners can decide to allow the appeal or accept Revenue’s refusal.
In the case of appeals where before 21 March 2016 a hearing has already commenced but has not been completed, the hearing had been completed but the Appeal Commissioner has not given his determination or the Appeal Commissioner has given his determination but the 10 day period within which a rehearing before the Circuit Court has not elapsed, the appellant retains his or her entitlement to request a rehearing before the Circuit Court.
Where before 21 March 2016 a hearing had commenced but was not completed, or was completed but the Appeal Commissioner had not issued his determination and the Appeal Commissioner who heard the hearing has vacated office, then the new Appeal Commissioner can either decide to rehear the appeal or can adjudicate on the appeal without a new hearing.
In all cases the provisions generally under the new system will apply to all appeals e.g. provisions regarding electronic issue of notices etc., pre-hearing procedures, and the publication of Appeal Commissioners determinations.
Consequential Amendments to Other Legislation
The Act also makes a number of amendments to the Taxes Consolidation Act 1997, the Stamp Duties Consolidation Act 1999, the Capital Acquisitions Tax Act 2003, the Value Added Tax Consolidation Act 2010, the Finance (Local Property Tax) Act 2012, Customs Act 2015, and the provisions of the Finance Act 2001 dealing with excise, to put in a standardised wording regarding making appeals which no longer refers to notice being given to Revenue and to a rehearing before the Circuit Court. The Act also makes a number of changes to delete provisions where entitlement to something depended on the opinion of an Inspector or Revenue as these types of provisions do not fit in to a self assessment system. For example the charging provisions of S.806 (transfer of assets abroad) did not apply where the individual showed in writing to the satisfaction of the Revenue that the purpose was not to avoid tax and was for bona fide commercial purposes. The reference to “where it is shown to the satisfaction of the Revenue” is now deleted.
On a brief examination of the Act there would appear to be a great many changes to the appeal system given that 19 sections of the TCA have been replaced with 48 new sections. However as can be seen from the above, although the appeal process is now more independent of Revenue, apart from the deletion of the entitlement to an appellants right to a rehearing before the Circuit Court, the appeal process itself is not significantly changed. One significant change is the ability of the Appeal Commissioners to hold case management conferences and to determine appeals following a case management conference. The fact that one of the functions of the Appeal Commissioners is stated to be doing all other such things as they consider conducive to the resolution of disputes between appellants and the establishment of the correct liability of tax to appellants, the fact that they are required to provide an opportunity to the parties to settle matters under appeal by agreement, to avoid undue formality and to adopt a flexible approach in relation to procedural matters combined with their ability to adjudicate appeals without holding a hearing may suggest that in the future the Appeal Commissioners may adopt the role of mediator between taxpayers and Revenue rather than simply judging an appeal.
The fact that all determinations of the Appeal Commissioners must be published within 90 days of being notified to the parties should greatly assist taxpayers in deciding whether to take appeals in the future. This combined with the power of the Appeal Commissioners to adjudicate appeals without holding a hearing, generally and based on previous decisions made should reduce the number of appeals being made and accordingly improve the efficiency of the appeals system.