Tax officials used an incorrect method to calculate that a chartered accountant owed more than €1.5 million in income tax over three years, he claims.
Self-employed Nicholas Cushnahan alleges he was wrongly assessed for income tax over three years based on his receipt of lump sums. These commission fees covered work spanning 15 years and should have been assessed using the “accrual” accounting method, he claims.
Dublin-based Mr Cushnahan says he was a partner at Houlihan Cushnahan & Co accountancy practice during the relevant tax years of 2011 to 2013.
His tax returns for the three years, putting his liabilities at about €219,000, were not accepted by Revenue, which went on to select the accountancy practice for an audit in 2015. Revenue then issued amended assessments at €1.58 million and Mr Cushnahan unsuccessfully appealed this to the Tax Appeal Commission (TAC).
On Monday, Mr Cushnahan was granted permission to seek judicial review of the TAC’s February 2023 decision which found he did not discharge the burden of proof to show the amount assessed by Revenue was not payable.
Ms Justice Niamh Hyland also made an order temporarily suspending the effects of the TAC’s decision. As only the applicant was represented in court and aware of the application, she gave the commission permission to apply to court if it wants to vary or remove this order. She adjourned the case to a date later this month.
As well as bookkeeping, preparing accounts and tax returns at Houlihan Cushnahan, the applicant says he was involved in the creation of syndicated property investment trusts of which partners in the accountancy practice were trustees.
Commission fees were received and distributed by the practice at the creation of the trusts but the work extended over 15 years, Mr Cushnahan says, adding that a previous Revenue audit of the practice had raised no issue with the trail commission being treated as deferred income.
His action alleges the TAC failed to give sufficient weight to evidence he submitted outlining the existence of investment syndicates, the creation of trusts and finance raised on behalf of those syndicates and the amount of commission to be paid.
It also did not sufficiently consider that he was a trustee of those trusts and that commission paid to the accountancy practice by brokerage facilities and then distributed related to future reporting obligations over a 15-year period, he says.
The concept of “accrual” accounting is a fundamental accounting principle that the Tax Consolidation Act of 1997 specifically requires to be applied over a “receipts basis”, he adds.
He had a legitimate expectation that, having identified section 18 of the 1997 Act, the TAC would apply this provision in line with its express terms.
Ruling on Mr Cushnahan’s appeal in February, the TAC said it did “not accept as credible” his explanation that part of the excess money received by him from the accountancy practice was due to deferred trail commission payments for syndicate trusts of which he was a trustee. Noting he is a chartered accountant, the TAC also did “not accept as credible” that no documentary evidence tending to support his claim in relation to his retention of alleged overpayments of profits from the accountancy practice was presented.
Mr Cushnahan, who has an address on Adelaide Road, Glasthule, wants the court to quash the decision and to declare the TAC had erred by failing to apply the accrual principle and instead applying the receipts method, which found he had an income of €846,000 in 2011, €1.1 million in 2012 and €1.2 million in 2013.
