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Asked to examine patronage share schemes, the Revenue Commissioners’ large cases division has identified British case law to defend its tax claims against Kerry Co-op shareholders in upcoming appeals.
Internal documents refer to Pope v Beaumont, a 1941 UK case in which a cash bonus issued by a co-op in proportion to its trading activity with each member was found to be taxable trading income rather than a dividend.
Another case involving Staffordshire Egg Producers in 1963 centred on whether the issue of bonus shares should be taxed in the same way as a cash bonus. The Revenue notes that the court decision was to treat bonus shares in the same way as cash.
Test case
When the Tax Appeals Commission hears a test case on Kerry Co-op’s patronage shares, Revenue lawyers are likely to use both UK cases to defend their interpretation that the value of those shares should have been declared as taxable income at the time they were received.
Meanwhile, taxpayers opposing the Revenue’s interpretation are expected to argue that their patronage shares were worth no more than their par value of €1.25 until they sold or transferred them.
Argument
This was the argument won by Kerry and Avonmore plc when they took a court case over the rules governing their shareholding in the Irish Dairy Board in the late 1980s.
Listen to a discussion of the Revenue's Kerry co-op project in our podcast below:
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