A supplier to the automobile sector has been unsuccessful in a €3.38 million legal fight regarding corporation tax and dividend withholding tax (DWT) with the Tax Revenue Department. The Tax Appeals Commission (TAC) affirmed the vehicle part supplier’s tax assessment of €1.77 million spanning the years 2015 to 2018, and a DWT assessment of €1.6 million in 2017 and 2018.
The central disagreement between the entity and the Tax Revenue comprised how the firm paid an aggregate of €14 million to employee benefit trusts (EBTs), which the company justified as a measure for employee reward and motivation. The Tax Revenue, however, countered this argument, stating no tangible or statutory evidence that the EBTs served a purpose beyond tax evasion.
The firm recorded gross profits totalling €28.2 million from 2010 to 2014 but used ‘pension costs’ to employee benefit trusts as a way of lessening its tax liability. The beneficial proprietor of the business, referred to as GO in the report, received €10.7 million from the EBTs in 2013 and 2014. Revenue defended its stance that the EBTs were used to obtain funds from the company without incurring tax.
The Tax Revenue added that the firm’s deduction claim related to buying the EBTs is not valid for corporate tax reasons. It argued that funds used to purchase the EBTs are classed as capital assets acquisition and thus, can’t be claimed as a legitimate corporation tax deduction.
After examining the evidence, TAC commissioner Claire Millrine concluded that the EBTs were not used to reward or motivate the company’s employees, but were purely for the benefit of the firm’s beneficial owner, GO. She stated that the company failed to provide any valid business justification for those transactions.
Ms Millrine articulated that the primary intent behind the money transfer from the appellant company to the different EBTs was to leverage GO’s tax-free advantage and to claim a tax reduction for the total sum from the gross profit. While GO doesn’t live here and isn’t an employee of the appellant firm, the latter operates in the car manufacturing sector as a parts supplier.