Tuesday, November 08, 2022

Gordon Deegan

The owner of some of Ireland’s best known pubs including Kehoe’s and The Stag’s Head in Dublin has lost out on a seven-year long €400,000 tax battle with the Revenue Commissioners.

This follows a three judge Court of Appeal ruling that Louis Fitzgerald is liable to pay a combined €400,000 domicile levy for the years 2011 and 2010.

The written judgement, delivered by Ms Justice Caroline Costello, upholds a 2021 High Court judgment which found that Mr Fitzgerald is liable for the €400,000.

Mr Fitzgerald is the owner of one of the largest hospitality groups in the country and some of the other businesses in the Louis Fitzgerald Group include Bruxelles, The Gin Palace, Grand Central and Quays Temple Bar along with An Poitin Stil, The Arlington Hotel and The Louis Fitzgerald Hotel.

Domicile levy

The case initially came before the High Court after Mr Fitzgerald appealed a 2020 ruling by the Tax Appeals Commission that the domicile levy assessment of €400,000 by Revenue in 2015 should stand.

The domicile levy of €200,000 is payable by any person who is domiciled in Ireland and whose worldwide income exceeds €1 million; whose Irish property is greater in value than €5 million and whose income tax liability for the year was less than €200,000.

Mr Fitzgerald stated that he incurred capital expenditure of €25.2 million on the construction of the Louis Fitzgerald hotel at Newlands Cross and €14.6 million on plant and machinery and in 2010 and in 2011 the hotel was loss making.

Mr Fitzgerald availed of the losses in respect of his hotel trade and applied for an income tax refund for €361,346 in respect of 2010 and €919,557 in respect of 2011.

In 2013, Revenue processed the claims but retained €400,000 in domicile levy after finding that Mr Fitzgerald was subject to the levy for 2010 and 2011.

‘Worldwide income’

Mr Fitzgerald argued that he was not liable for the domicile levy as his “worldwide income” was nil and accordingly, he was not a “relevant individual” for the purposes of the domicile levy.

Mr Fitzgerald also argued that the losses that he incurred in his hotel trade reduced the level of the income under each of his other sources of income.

Mr Fitzgerald also argued that as he paid €209,281 in Universal Social Charge (USC) for 2011, he was outside the charge to domicile levy for that year.

In the Court of Appeal ruling, Ms Justice Costello found that Mr Fitzgerald was “a relevant individual” for the years 2010 and 2011and was liable to pay the full domicile levy for each of the years. Mr Justice Costello found that trading losses are not deductible in arriving at worldwide income for domicile levy purposes.

Ms Justice Costello found that Revenue acted correctly in withholding the total sum of €400,000 in respect of the total charge to domicile levy and that the Tax Commissioner and the High Court were correct in their rulings.

Universal Social Charge

Ms Justice Costello also rejected Mr Fitzgerald’s argument that USC is an income tax as it was a charge on his income.

She stated: “The two taxes are utterly distinct: there is a statutory framework for income tax and a separate code for USC and the mere fact that income tax and USC are each taxed on income does not make USC “income tax” within the meaning of the definition of a relevant individual for the purposes of the domicile levy, or otherwise.”

She found further that “the USC is a tax on income, but it is not and does not thereby become, income tax and the liability to pay USC is not a liability to income tax”.

She stated that it follows that Mr Fitzgerald was a relevant individual for the year 2011 as his liability to income tax was less than €200,000 and thus he came within the definition.

She said: “His payment of USC in excess of €200,000 did not take him outside the definition and it was not a payment of income tax.”

Ms Justice Costello stated that her preliminary view on legal costs is that Mr Fitzgerald is liable for the costs of Revenue in the case.

She stated that if Mr Fitzgerald wishes to contend this he may request a short hearing within 14 days of the delivery of the judgement and submit a written submission within ten days with Revenue to respond in its own written submission.

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