Costs Risk In Appeals From The Irish Tax Appeals Commission

• Published date: 11 May 2021
• Subject Matter: Litigation, Mediation & Arbitration, Tax, Trials & Appeals & Compensation, Tax Authorities
• Law Firm: Maples Group
• Author: Mr Kevin Harnett, Eugene McCormick, Andrew Quinn and William Fogarty

The Finance (Tax Appeals) Act, 2015 introduced a new architecture for the hearing and determination of tax appeals. Amongst other changes, the Tax Appeals Commission (the "TAC") replaced the Appeal Commissioners, with appeals directly to the High Court only on question(s) of law arising from the TAC's determination (a 'case stated'), rather than to the Circuit Court on the basis of a full rehearing of the tax appeal. A recent High Court judgment considered the question of costs awards in these cases stated.

Arguments on Costs

In O'Sullivan v. Revenue Commissioners [2021] IEHC 118, the High Court judge, Mr Justice Sanfey, dismissed the taxpayer's case stated and affirmed the TAC's determination in the matter. The Court was subsequently asked to rule on the Revenue Commissioners' application for its costs of the case stated. The taxpayer resisted the costs application on three grounds:

(a) The correct legal test for an award of costs in a case stated from the TAC was set out in the Taxes Consolidation Act 1997 (the "TCA"), rather than the test recorded in the Legal Services Regulation Act 2015 (the "LSRA"). As a result, rather than having to award costs to the successful party (the default position, absent any countervailing considerations set out in the legislation (e.g., the particular nature and circumstances of the case and the conduct of the proceedings by the parties)), the Court has a full discretion as to any costs order;

(b) Under the old regime, in the full rehearing in the Circuit Court, typically the Court made no order as to costs (i.e each side bore their own costs), unless the appeal was unmeritorious, and that custom should continue and should inform the Court's discretion; and

(c) To instead adopt a default position of awarding costs to a successful party risked a 'chilling' effect, deterring aggrieved taxpayers from taking merited cases stated to the High Court;

Decision

In ruling on costs ([2021] IEHC 193), the Court rejected the taxpayer's arguments, stating that rather than risking a 'chilling' effect, if there was no costs sanction it may become routine for appellants to bring cases stated even where they have little chance of success. The Court applied the LSRA test on costs, rather than that in the TCA and, finding that the taxpayer was entirely unsuccessful in the case stated and that none of the countervailing considerations in the LSRA test applied, it awarded the Revenue Commissioners their costs. In doing so, the Court...