A former senior Revenue official thought a £38.8 million tax bill raised on the Dunne family trust would have been appealed if the Revenue lost its case before the Appeal Commissioners, the tribunal heard.
Christopher Clayton, who was in charge of the Capital Gains Tax section of the Revenue up to 1986, said he was not pessimistic about the Revenue's chances of winning before the Appeal Commissioners. He said that before the case he was not confident but was hopeful. He said he thought the "probability" was that the Revenue would win.
"I thought that whoever lost at the Appeal Commissioners would go further," Mr Clayton told Mr John Coughlan SC, for the tribunal. "The trustees and Ben Dunne had indicated that they would go to the Supreme Court if necessary." In the event the Appeal Commissioners ruled in November 1988 in favour of the trust and the Revenue decided not to appeal. The decision not to appeal was agreed by the board and the official involved, and was in agreement with the view of the Revenue's counsel, Nial Fennelly SC.
Mr Clayton said he became aware in 1985, by way of a call from the then Revenue chairman, Séamus Paircéir, that the tax position of the Dunnes family trust was an issue. The trust had been set up in March 1964 and was coming to the end of its 21-year lifespan. Mr Clayton said he decided a capital gains tax liability was likely.
Ownership of the Dunnes Stores group was held by the trust with the Dunne children being the beneficiaries.
When the old trust settled the shares in the Dunnes holding company in a new trust, with the same trustees, Mr Clayton decided a tax liability had arisen. Advice was sought from a senior counsel, who took a similar view. Mr Clayton set about issuing an assessment to the trust. A capital gains tax bill of £38.8 million was deemed to be due. The trust appealed against the assessment to the Appeal Commissioners. Mr Clayton was promoted in October 1986 and had less to do with the case after that date.
A note from April 1987 recorded that Mr Paircéir was to meet Mr Dunne on April 27th, 1987. Mr Clayton said he could not say when he became aware that Mr Paircéir was meeting Mr Dunne. "It clearly wasn't a secret within the Revenue," Mr Clayton said, referring to the Revenue note.
He said he did not recall any comment within the Revenue as to why the Revenue was meeting a beneficiary of the trust. "It is clear from the [ Revenue] papers that Ben Dunne acted as if he was a partial owner of shares." Mr Coughlan said a valuation of the Dunnes group, for the purposes of arriving at a capital gains tax bill, was set at £120 million. Later a separate tax bill was settled with the trust with an accepted value for the Dunnes group of £82 million.
Then Mr Paircéir met Mr Dunne. The issue of a lower than £120 million valuation for the Dunnes group was discussed within the Revenue. An £82 million valuation would give a tax bill of £23 million. Mr Paircéir met Mr Dunne who said he was not in a position then to pay £23 million. The Revenue then began to work on further calculations that led to varying figures being due in tax, down to as low as £13 million.
Mr Clayton continues his evidence today.