IEHC 59 — IEHC 59 — High Court

THE HIGH COURT [2026] IEHC 59 Record No.s: 2023/178R, 2023/176R & 2023/179R

BETWEEN:-

JOHN HEGARTY, DAVID GEARY AND MARTIN WARD APPELLANTS

AND

THE REVENUE COMMISSIONERS RESPONDENT

Judgment of Mr Justice Oisín Quinn delivered on 5 February 2026

I. INTRODUCTION 1. This is an appeal by way of a Case Stated dated 12 June 2023 against a Determination (“the Determination”) of the Tax Appeals Commissioner (“TAC”) of 20 February 2023. The Case Stated seeks the opinion of the High Court on certain questions pursuant to section 949AQ of the Taxes Consolidation Act 1997 as amended (“TCA 1997”). The Case Stated was heard in the High Court over two days on 4 and 5 November 2025.

2. As described in the Case Stated, the central issue in the appeal before the TAC was whether gains arising on the disposal of government Gilts under Gilt Forward Contracts (“GFCs”) were properly exempt from Capital Gains Tax (“CGT”) under section 607 TCA 1997 and,

1 secondly, whether losses arising on payments made pursuant to Foreign Exchange Contracts for Difference (“FECDs”) were allowable losses under the provisions of section 31 TCA 1997 and hence, available for offset against the Taxpayers’ then current or future capital gains, as provided for in section 546 TCA 1997.

3. When the matter was before the TAC the Taxpayers had submitted that the losses on the FECDs were allowable, whereas the Respondent (the “Revenue”) had submitted that the transactions undertaken by the Taxpayers (the acquisition and disposal of the Gilts under the GFCs and the FECDs) were primarily undertaken to secure tax advantages and as such fell foul of the anti-avoidance provisions contained in section 811 TCA 1997.

4. In the Determination, the TAC found in favour of the Revenue and concluded that the Taxpayers had procured a “tax advantage” as a result of engaging in a “tax avoidance transaction” within the meaning of section 811 of the TCA 1997 and that the transactions resulted in a misuse of section 31 TCA 1997 having regard to the purposes for which it was provided.

5. The most important issue raised by the questions contained in the Case Stated concerns whether or not the TAC erred in law in his approach to the interpretation and application of the statutory provisions in force at the time concerning anti-avoidance contained in the version of section 811 of the TCA 1997 then in force.

II. BACKGROUND 6. The factual background to this dispute can be found in the material facts found by the TAC. The Taxpayers took no issue with these findings. The material facts are set out in para. 9 and further in para. 85 of the Determination as follows:-

“9. As all the transactions under appeal entered into by all the Appellants were identical in nature (bar quantum and timings), the Commissioner confines his material findings of fact to the first transaction entered into by the first-named Appellant. As such, the following findings of fact, while representative, are identical to the other three transactions entered into by the first-named Appellant and all of the transactions entered into by the remaining Appellants (bar quantum and timings). Those material findings of fact are as follows:

2 9.1. The first-named Appellant opened a Euro bank account with Schroders & Co. Ltd. (“Schroders”) on 1st November 2007.

9.2. On 13th November 2007, Schroders issued an International Swap Dealers Association (“ISDA”) master agreement dated 13th November 2007.

9.3. On a date unknown but evidently shortly after 13th November 2007, the first named Appellant signed the agreement at 9.2.

9.4. On 15th November 2007, the first-named Appellant lodged the sum of €1,400,000 to his then solicitors’ client account.

9.5. The sum of €1,085,714 was lodged by the first-named Appellant’s solicitors to the first-named Appellant’s Schroders Euro Account on 16th November 2007.

9.6. A Gilt Forward Contract (“GFC”) was entered into by the first-named Appellant and Schroders with: 9.6.1. The issuing of a “Gilt Forward Term Sheet” by Schroders to the first named Appellant. 9.6.2. The signing of the Gilt Forward Term Sheet by the first-named Appellant on 19th November 2007. 9.6.3. The issuing of a “Gilt Forward Confirmation” by Schroders to the first named Appellant. 9.6.4. The signing of the Gilt Forward Confirmation by Schroders on 11th December 2007. 9.6.5. The counter-signing of the Gilt Forward Confirmation by the first- named Appellant on 14th December 2007.

9.7. A Foreign Exchange Contract for Difference (“FECD”) was entered into by Schroders and the first-named Appellant with: 9.7.1. The issuing of a FECD Term Sheet by Schroders to the first-named Appellant. 9.7.2. The signing of the FECD Term Sheet by the first-named Appellant on 19th November 2007. 3 9.7.3. The issuing of a FECD conformation by Schroders to the first- named Appellant. 9.7.4. The signing of the FECD confirmation by Schroders on 11th December 2007. 9.7.5. The countersigning of the FECD confirmation by the first-named Appellant on 14th December 2007.

9.8. The issue of a letter of instruction on 11th December 2007 to Schroders by the first-named Appellant on regarding the settlement of the gilt forward transaction.

9.9. The issue of a letter of instruction on 11th December 2007 to Schroders by the first-named Appellant regarding the settlement of the FECD transaction.

9.10. The signing of the cash charge over cash account with Schroders document dated 19th November 2007 on behalf of the first-named Appellant and witnessed thereof.

9.11. The issuing of the “Gilt Forward Maturity Confirmation” by Schroders.

9.12. The acquisition of €10 million nominal value of Irish Treasury Stock 3.25% (2003 to 18th April 2009) by Schroders, acting as agent for the first- named Appellant for €10,114,080.60 on 20th December 2007 for value on 21st December 2007 and the debiting of the Schroder’s Euro bank account with the sum of €10,114,080.60 on 20th December 2007 for value on 21st December 2007.

9.13. The sale of €10 million nominal value of Irish Treasury Stock 3.25% (2003 to 18th April 2009) by the first-named Appellant to Schroders for the sum of €19,903,830.60 on 21st December 2007 for value on 21st December 2007 and the crediting of the sum of €19,903,830.60 to the Schroders Euro bank account on 20th December 2007 for value on 21st December 2007.

9.14. The issuing of the FECD maturity confirmation by Schroders. 4 9.15. The payment of €9,913,105.26 to Schroders by the first-named appellant and the debiting of the Schroders Euro bank account with the amount of €9,913,105.26 on 20th December 2007 for value on 21st December 2007.”

7. Then at para. 85 of the Determination the TAC sets out his findings on the material facts as follows:- “Material Facts 85. Having reviewed the documentation submitted, and having listened to the oral submissions of the parties and their respective witnesses at the hearing, the Commissioner makes the following findings of material fact:

85.1. The Appellants entered into a number of transactions in 2007 and 2008. These transactions involved the acquisition of financial products knows as GFCs and FECDs.

85.2. All of the Appellants entered into both the GFC and FECD transactions and as such, none of the Appellants acquired either the GFC or the FECD on a standalone basis.

85.3. Aside from the experts’ reports and a letter from Schroders dated 26th March 2010 stating that the GFC and FECD transactions were independent to each other and could have been acquired in isolation, limited documentation was made available to the Commissioner on the operation of the transactions. The Commissioner notes that the letter from Schroders stating that one or other of the transactions could be taken out in isolation is dated several years after the transactions were entered into by the Appellants.

85.4. In particular, no investor offering memoranda or similar documentation was presented to the Commission regarding the launch of or operation of the transactions.

85.5. Both the GFC and FECD transactions had the same trade, expiry and settlement dates. The dates on which the GFCs and FECDs were acquired and 5 disposed of, were for a relatively short period of time, spanning a period of between four to eight weeks.

85.6. At the inception of the transactions, the Appellants lodged a sum of money into their solicitors’ client account. Aside from this being provided to discharge professional fees, no evidence was provided to the Commission which explained why the Appellants were required to make this payment.

85.7. As this evidence was not provided to the Commission, the Commissioner in noting that no contractual margin requirement was in place, makes the material finding that this payment equated to the provision of a margin as it is illogical that an investment provider would offer products of a type provided to the Appellants without any apparent form of recourse.

85.8. Those sums of money advanced by the Appellants were insufficient to purchase the government bonds acquired at inception of the transactions.

85.9. The results of the transactions entered into by the Appellants was that –

85.9.1. They made a gain on the GFC transactions.

85.9.2. They made a loss on the FECD transactions.

85.9.3. The gain on the GFC transaction is ordinarily exempt from the payment of CGT.

85.9.4. The loss on the FECD transaction is ordinarily allowable for CGT purposes and as such is ordinarily available for offset against CGT gains.

85.9.5. The gain on the GFC and the loss on the FECD transactions were roughly equal and opposite in monetary terms. The transactions when combined produced a monetary loss which was overshadowed by the potential CGT benefits obtained. 6 81.9 The investment return on the transactions was derived from the application of a complex mathematical formula applied on the settlement date. As the part of the formula referable to the FECD transaction, which related to currency exposure was self-cancelling, the return on both the GFC and FECD transactions was derived from the movement on the Euro Stoxx 50 index.

81.10 There was a significant probability that the transactions entered into by the Appellants would fall within the range provided under the formula. If the GFC and FECD transactions fell within the provided range it would result in the GFCs deriving gains and the FECDs suffering losses.

81.11 Of the transactions entered into by the Appellants, two such transactions fell outside the range of the formula used to compute the investment returns. In both of these instances, the transaction close-out arrangements were altered from that originally provided under the scheme. The manner of the alteration was that rather than the Appellants settle the transactions by physical delivery, the close out arrangements were amended to require the Appellants to cash settle those transactions. The effect of this amendment was that the Appellants avoided a CGT gain and in place incurred a CGT loss.

81.12 None of the transactions entered into by the Appellants were traded on a secondary market.

81.13 The fees payable to the promoters of the scheme were not claimed by the Appellants when computing their allowable CGT losses.”

[Note: the sub-paragraph numbering is as per the Determination].

8. From the point of view of the Taxpayers, these transactions gave rise to certain tax consequences which they claimed entitled them to allowable losses for CGT purposes. So, for example, using the figures that related to one of the transactions entered into by the first Appellant, the Taxpayers claimed that the sale of the Irish Treasury Stock 3.25% (2003 to 18th April 2009) gave rise to a gain of €9,789,750 [€19,903,830.60 - €10,114,080.60]. 7 As gains on disposals of Government securities, which include Irish Treasury Stock, are ordinarily exempt from CGT by virtue of section 607 TCA 1997 the Taxpayers deemed that they were not liable to CGT on these GFC gains. Then, following the transactions involving the FECDs, they incurred a loss on the disposal of the FECDs in the sum of €9,913,105.26. This loss was calculated in accordance with the provisions of section 546 TCA 1997. This loss was then claimed as an allowable CGT loss pursuant to section 546 of the TCA 1997. The Taxpayers then contended that this loss was available for offset against other capital gains made by them pursuant to the provisions of section 31 TCA 1997. These offsets were then deployed against gains made by them on the disposal of other chargeable assets in the Taxpayers’ returns from 2007 to 2011.

9. In 2012 and 2014 the Revenue issued Notices of Opinion (the “Opinions”) pursuant to section 811(6) of the TCA 1997. In summary, these Opinions stated that the Revenue had formed the opinion that these transactions constituted “tax avoidance transactions” within the meaning of section 811 TCA 1997 and that a “tax advantage” had accrued to the Taxpayers and that the tax consequences of the Opinions becoming final would be the disallowance of the capital gains tax “losses” claimed by the Taxpayers.

10. Consequently, the Taxpayers lodged appeals to the TAC in 2013 and 2014 in respect of these Opinions which were heard ultimately before the TAC at a hearing which commenced in October 2022 and ran for four days.

III. TAC DETERMINATION, 20 FEBRUARY 2023 11. Section 811 requires the Revenue when forming an opinion under section 811 to consider the “purpose” of the transaction or transactions in question. This is to be done by having regard to the form and substance of the transaction and any related transactions and to their final outcome and to the result of the transaction and any related transactions, per section 811(3)(b) TCA 1997.

12. The TAC sets out his findings on this issue in para.s 100-103 of the Determination as follows:-

“Purpose of the Transactions 100. The combined result of the GFC and FECD transactions was that the first-named 8 Appellant made a monetary loss of €723,248 (€35,186,038 - €35,909,286) including the fees payable to Schroders (as these costs were embedded in the transactions) but excluding the other advisor fees paid (but not claimed for CGT purposes) of €362,466.

101. The net result of the transaction was therefore that the first-named Appellant acquired capital losses of €35,909,286 for a total consideration of €1,085,714 (€723,248 + €362,466). While the Appellants’ Counsel submitted that the transactions were not envisaged to net-out, these results prove, relative to the losses obtained, they effectively did.

102. Counsel for the Appellants further submitted that the purpose of the transactions entered into by the Appellants was that they acted as a hedge against one another.

103. The Commissioner discounts this view for reasons following in paragraph 112 below and finds that the transactions entered into by the Appellants were done so primarily to give rise to a tax advantage having regard to the quantum of the generated CGT losses versus the monetary loss incurred by the Appellants.”

13. The reasons for discounting the Taxpayers’ “hedging” argument are then, as indicated in para 103 above, set out in para 112 as follows:-

“112. In noting that the acquisition of the GFCs which gains were almost certain and the polar applying to the FECDs materially resulted in the tax exempt gains substantially cancelling the ordinarily allowable tax losses, the Commissioner is of the view that the Appellants’ entitlement to the loss relief was highly contrived. This view is further compounded in noting that –

112.1. The GFC and FECD had the same trade, settlement and expiry dates.

112.2. All of the Appellants entered into the GFC and FECD transactions.

9 112.3. It would have been inconceivable for a reputable financial product provider to have provided the GFC or FECD products in isolation absent a contractual margin call unless the outcome that the transactions would net out and be all but guaranteed.

112.4. Of the 43 transactions entered into by the Appellants, all but two of those fell within the “acceptable” range. The position regarding the two out of range transactions is detailed at paragraph 81.11 above.

112.5. None of the GFCs or FECDs were traded on a secondary market.

112.6. Having regard to the short life-span of the GFCs and in noting the fixed interest return on the government gilts acquired by the Appellants, it appeared inconceivable to the Commissioner that the value of the gilts would have almost doubled in the period of ownership.

112.7. Aside from the sum referable to professional fees, no explanation or documentation was provided to the Commission as to why the Appellants were required to lodge a large sum of money into their solicitors’ client account prior to entering the transaction.

112.8. There is no commercial reality to acquiring some €36 million of CGT losses for a net outlay of some €1.1m.”

14. In forming the opinion contemplated by section 811(2) as to whether a transaction is a tax avoidance transaction, the Revenue are required by section 811(3)(a) to not regard a transaction as a tax avoidance transaction if either of one of two scenarios applies. These scenarios are known as (i) the “Business Exclusion” and (ii) the “Relief Exclusion”.

15. The relevant one here is the “Relief Exclusion” contained in section 811(3)(a)(ii). This provision will be considered in greater detail later, however in summary it indicates that a transaction shall not be regarded as a tax avoidance transaction, notwithstanding the provisions of section 811(2), if it was arranged for the purpose of obtaining the benefit 10 of, inter alia, a tax “relief” or “allowance” provided for in the TCA 1997 and the statutory provision that provides for this “relief” or “allowance” was not misused or abused “having regard to the purposes for which it was provided”; per section 811(3)(a)(ii).

16. In this case, the Taxpayers were claiming an “allowance” for the losses on the FECDs pursuant to section 31 of the TCA 1997. They were also, it should be noted, claiming the benefit of a “relief” under section 607 of the TCA in respect of the gains made on the sale of the Gilts.

17. The issue arises therefore, as to whether or not the transactions in question would result directly or indirectly in a misuse or an abuse of section 31 or indeed section 607 of the TCA 1997. In relation to this issue, the TAC found that the transactions in question did amount to a misuse of section 31, such that the Taxpayers could not get the benefit of the “Relief Exclusion”. There is no clear finding or analysis relating to the purpose of or the misuse or abuse of section 607. The relevant findings in this regard are contained in particular in para.s 107-122 of the Determination.

18. Firstly, the TAC found at para 107 that, as a matter of law essentially, there was a positive obligation on the Taxpayers to prove that the transactions did not result in the misuse or abuse of sections 31, 546 and 607 TCA 1997:-

“107. During the course of the hearing, the Appellants submitted that the loss arose directly from the correct application of section 546 TCA 1997. In so doing, there was a requirement on the Appellants to discharge the positive obligation to prove that the transactions did not result in “a misuse of the provision or an abuse of the provision having regard to the purposes for which it was provided”. However, despite the Appellants’ submissions, no credible explanation was advanced to discern the purpose of sections 31, 546 and 607 TCA 1997. In those circumstances, it is not clear how the Appellants can submit that those provisions were not misused or abused in claiming the artificial capital gains tax loss of €35,909,286.” (underlined for emphasis).

11 19. This point was returned to again by the TAC in para. 115 of the Determination where the TAC finds that the Taxpayers failed to discharge their “positive obligation” to prove that the transactions did not result in a misuse or abuse of the relevant provisions providing for the allowance, namely section 31 and 546 TCA 1997:-

“Furthermore, it is significant that the Appellants failed to discharge their positive obligation to prove that the transactions did not result in “a misuse of the provision or an abuse of the provision having regard to the purposes for which it was provided”. The Commissioner is therefore satisfied that the Appellants’ claim for capital gains tax loss relief cannot succeed and extends these findings to all of the transactions entered into by all of the Appellants.”

20. The conclusions of the TAC are then set out from para. 116 et seq. under the heading “Determination”. The key paragraphs are 116 to 122 which state as follows:-

“Determination 116. The Commissioner is satisfied that the purpose of the Appellants entering into the transactions was to obtain a gain on the disposal of the GFCs and a loss on the disposal of the FECDs as the Commissioner was unable to identify any commercial motive for the investment apart from the deemed tax advantage derived.

117. Therefore, the purchase and disposal of the GFCs and FECDs by the Appellants could have had no commercial purpose other than to crystallise an artificial tax loss. As such, in structuring the transactions in an attempt to procure the exemption contained in section 607 TCA 1997, the Commissioner is satisfied that the Appellants procured a significant “tax advantage” and that the purchase and sale of the transactions “was …. arranged primarily …. to give rise to a tax advantage” thereby constituting a “tax avoidance transaction”.

118. Contrary to the positive obligation to demonstrate that there was no “misuse …. or an abuse of” section 31 TCA 1997 “having regard to the purposes for which it was provided”, the Appellants failed to satisfy this 12 requirement. Therefore, it is not clear how the Appellants can succeed when there was no articulation of the purpose of section 31 TCA 1997.

119. In the absence of a statutory definition of the noun “loss” for capital gains tax purpose, the Commissioner relies on its ordinary meaning as denoting the process that leads to a position where you no longer have something or have less of something. The use of the noun “loss” in a financial context requires some element of financial deprivation. Therefore, in the interpretation of the term “losses accruing to that person” as set out in section 31 TCA 1997, the Commissioner is satisfied that the intention of the Oireachtas, as discerned was to alleviate financial hardship for actual monetary losses sustained.

120. The Commissioner is reassured that this is the correct interpretation by consideration of section 556 TCA 1997 which restricts indexation relief to prevent turning an actual loss into a gain, increasing an actual loss or indeed converting an actual gain into a loss.

121. In this regard, the Commissioner concludes that the Appellants engaged in a highly contrived series of steps that could not have been envisaged by the Oireachtas in enacting legislation that permits the calculation of “allowable losses” in accordance with section 546 TCA 1997 to reduce “chargeable gains” pursuant to section 31 TCA 1997.

122. Therefore, in compliance with the Commissioner’s statutory obligations, the Commissioner engaged in an evaluation of the transactions and the relevant legislation and finds that the Appellants procured a ‘tax advantage’ as a result of engaging in a “tax avoidance transaction” and that the transactions resulted in a misuse of section 31 TCA 1997 having regard to the purposes for which it was provided. The Commissioner is therefore satisfied that the Appellants’ claim for capital gains tax loss relief cannot succeed.” (Underlined for emphasis).

21. This part of the Determination cited above is both central and critical. This portion of the TAC’s decision appears directly under the heading “Determination” which indicates 13 that it is the key part of the decision of the TAC. I have highlighted certain words above to indicate the logic of the reasoning described by the TAC. This will be returned to later as part of this Court’s analysis of the points of law raised in this Case Stated.

22. Consequently the TAC reduced the Taxpayers’ allowable CGT losses to the net monetary loss incurred on the two transactions. As the first Appellant had made a profit on the disposal of the Gilts of €35,186,038 and a loss on the disposal of the foreign currency contracts for difference of €35,909,286 which gave, adopting this approach, a net loss of €723,248 which was considered allowable for CGT purposes.

23. Finally, there was a relatively tangential issue about whether certain fees paid to advisors by the Taxpayers should have been included when computing the losses allowed on the transactions. In this regard, at para. 125 of the Determination, the TAC concluded as follows:-

“125. For reasons best known to the Appellants, the fees paid to the first-named Appellant’s advisors in the sum of €362,466 were not claimed by the first-named Appellant in computing the CGT losses as they were deemed to be unconnected with the transactions. It therefore follows that those fees paid by the first-named Appellant and the like fees paid by all of the Appellants are not allowable in calculating the overall allowable CGT losses as they were similarly deemed unconnected with the transactions.”

IV. CASE STATED 24. Arising from the Determination, the Taxpayers requested that the TAC submit a Case Stated to the High Court. The TAC draft a Case Stated and invited submissions from both sides. There were no submissions apparently made on behalf of the Revenue. Having considered the Taxpayers’ submissions, the TAC then submitted a Case Stated to the High Court on 12 June 2023. There were originally fourteen “points of law on which the opinion of the High Court” was sought. Four of these were withdrawn by the Taxpayers.

25. Accordingly, pursuant to section 949AQ (1) (a) (v) TCA 1997, the Case Stated in paragraph 25 seeks the opinion of the High Court on the following ten “points of law”:- 14 1. Did the Commissioner err in law in wrongly concluding that the purpose of section 31 TCA, as intended by the Oireachtas, is to provide relief to ameliorate actual financial hardship correlating to actual monetary loss and in so doing did the Commissioner not adequately consider, or ignore, the decision of Stack J in Dermot Hanrahan v Revenue Commissioners [2022] IEHC 43?

2. Did the Commissioner err in law in failing to identify any purpose for section 607 TCA 1997 before concluding that the Appellants had misused section 31 TCA 1997?

3. Did the Commissioner err in law in holding that section 31 TCA 1997 had been misused by the Appellants, having regard to the purpose for which it was enacted?

4. Did the Commissioner err in law in failing to conclude that taken separately each of the GFC and FECD transactions had a commercial purpose of probable and / or potential gain, and taken together had a commercial purpose of risk mitigation and / or hedging?

5. Did the Commissioner err in law in reaching conclusions as to the probabilities of outcome for the GFC and FECD transactions in circumstances where there was no expert evidence to support same and by the mistaken analysis of concluding that the actual outcome established the a priori probability of same?

6. Did the Commissioner err in law in concluding that the transactions entered into by the Appellants were entered into primarily to give rise to a tax advantage?

7. Did the Commissioner err in law in holding that there was a tax avoidance transaction (as defined in section 811 TCA 1997)?

8. Did the Commissioner err in law by following authorities from the UK rather than established Irish precedent to the contrary? 15 9. Did the Commissioner err in law in concluding that the loss for CGT purposes should be restricted to the “actual financial loss”?

10. Did the Commissioner err in law in concluding that the loss for CGT purposes should exclude a deduction for advisor fees?

V. APPLICABLE LEGAL PRINCIPLES AND LEGISLATION (i) Approach to questions of statutory interpretation 26. The points of law raised by the Case Stated involve in depth consideration of the proper interpretation of the relevant statutory provisions. As a general starting point it is clear that the correct approach is now best set out by the Supreme Court in the judgment of Murray J. in Heather Hill v An Bord Pleanála [2022] IESC 43 at para.s 105 to 116 in particular.

27. By way of recent background, the Supreme Court decisions in Dunnes Stores v Revenue Commissioners [2020] 3 IR 480 and then in Bookfinders Ltd. The Revenue Commissioners [2020] IESC 60 (O’Donnell J. at para 52 in particular) were helpfully considered by McDonald J. in Perrigo Pharma v The Revenue Commissioners [2020] IEHC 552. McDonald J. helpfully provides a summary which is useful, not least because some of the principles referred to are particularly applicable to taxation statutes. At para 74 McDonald J. states:-

“The principles to be applied in interpreting any statutory provision are well settled. They were described in some detail by McKechnie J. in the Supreme Court in Dunnes Stores v. The Revenue Commissioners [2019] IESC 50 at paras. 63 to 72 and were reaffirmed recently in Bookfinders Ltd v. The Revenue Commissioner [2020] IESC 60. Based on the judgment of McKechnie J., the relevant principles can be summarised as follows:

(a) If the words of the statutory provision are plain and their meaning is self-evident, then, save for compelling reasons to be found within the Act as a whole, the ordinary, basic and natural meaning of the words should prevail; 16 (b) Nonetheless, even with this approach, the meaning of the words used in the statutory provision must be seen in context. McKechnie J. (at para. 63) said that: “… context is critical: both immediate and proximate, certainly within the Act as a whole, but in some circumstances perhaps even further than that”;

(c) Where the meaning is not clear but is imprecise or ambiguous, further rules of construction come into play. In such circumstances, a purposive interpretation is permissible;

(d) Whatever approach is taken, each word or phrase used in the statute should be given a meaning as it is presumed that the Oireachtas did not intend to use surplusage or to use words or phrases without meaning;

(e) In the case of taxation statutes, if there is ambiguity in a statutory provision, the word should be construed strictly so as to prevent a fresh imposition of liability from being created unfairly by the use of oblique or slack language;

(f) Nonetheless, even in the case of a taxation statute, if a literal interpretation of the provision would lead to an absurdity (in the sense of failing to reflect what otherwise is the true intention of the legislature apparent from the Act as a whole) then a literal interpretation will be rejected;

(g) Although the issue did not arise in Dunnes Stores v. The Revenue Commissioners, there is one further principle which must be borne in mind in the context of taxation statute. That relates to provisions which provide for relief or exemption from taxation. This was addressed by the Supreme Court in Revenue Commissioners v. Doorley [1993] I.R. 750 where Kennedy C.J. said at p. 766:-

17 “Now the exemption from tax, with which we are immediately concerned, is governed by the same considerations. If it is clear that a tax is imposed by the Act under consideration, then exemption from that tax must be given expressly and in clear and unambiguous terms, within the letter of the statute as interpreted with the assistance of the ordinary canons for the interpretation of statutes. This arises from the nature of the subject-matter under consideration and is complementary to what I have already said in its regard. The Court is not, by greater indulgence in delimiting the area of exemptions, to enlarge their operation beyond what the statute, clearly and without doubt and in express terms, excepts for some good reason from the burden of a tax thereby imposed generally on that description of subject- matter. As the imposition of, so the exemption from, the tax must be brought within the letter of the taxing Act as interpreted by the established canons of construction so far as possible”.

28. In Bookfinders O’Donnell J. (as then was) emphasises that the task of statutory interpretation is the ascertainment of meaning and that some degree of uncertainty is almost inevitable. Hence the role of the Court is to apply the principles of statutory interpretation to assist in achieving clarity as to the meaning of the words in question. O’Donnell J. states at para 52 as follows:-

“52. The task of statutory interpretation in any context is the ascertainment of meaning communicated in the highly formal context of legislation. But some degree of uncertainty or lack of clarity is almost inevitable, and the principles of statutory interpretation are designed to assist in achieving clarity of communication. As long ago as 1964, in C.K. Allen, Law in the Making, (Oxford: Oxford University Press, 7th ed., 1964), the 7th edition of a textbook which had spanned the golden age of strict literal interpretation, Professor C.K. Allen observed at p. 349 that:-

“common experience tells us that it is impossible to devise any combination of words, especially in the form (which all laws must take) 18 of a wide generalisation, which is absolutely proof against doubt and ambiguity. So long as men can express their thoughts only by the highly imperfect instrument of words, an automatic, irrefragable certainty in the prescribed rules of social conduct is not to be attained”.

It is not, and never has been, correct to approach a statute as if the words were written on glass, without any context or background, and on the basis that, if on a superficial reading more than one meaning could be wrenched from those words, it must be determined to be ambiguous, and the more beneficial interpretation afforded to the taxpayer, however unlikely and implausible. The rule of strict construction is best described as a rule against doubtful penalisation. If, after the application of the general principles of statutory interpretation, it is not possible to say clearly that the Act applies to a particular situation, and if a narrower interpretation is possible, then effect must be given to that interpretation. As was observed in Kiernan, the words should then be construed “strictly so as to prevent a fresh imposition of liability from being created unfairly by the use of oblique or slack language.”

29. These developments are then discussed and considered by Murray J. in Heather Hill from para. 105 in particular. At para 108 Murray J. indicates that to a certain extent the literal and purposive approaches are no longer “hermetically sealed”. In seeking to maintain the “clarity of the distinction” Murray J. identifies four propositions “that must be borne in mind”. These are set out from para.s 113-116 as follows:-

“113. First, ‘legislative intent’ as used to describe the object of this interpretative exercise is a misnomer: a court cannot peer into minds of parliamentarians when they enacted legislation and as the decision of this court in Crilly v. Farrington [2001] 3 IR 251 emphatically declares, their subjective intent is not relevant to construction. Even if that subjective intent could be ascertained and admitted, the purpose of individual parliamentarians can never be reliably attributed to a collective assembly whose members may act with differing intentions and objects.

19 114. Second, and instead, what the court is concerned to do when interpreting a statute is to ascertain the legal effect attributed to the legislation by a set of rules and presumptions the common law (and latterly statute) has developed for that purpose (see DPP v. Flanagan [1979] IR 265, at p. 282 per Henchy J.). This is why the proper application of the rules of statutory interpretation may produce a result which, in hindsight, some parliamentarians might plausibly say they never intended to bring about. That is the price of an approach which prefers the application of transparent, coherent and objectively ascertainable principles to the interpretation of legislation, to a situation in which judges construe an Act of the Oireachtas by reference to their individual assessments of what they think parliament ought sensibly to have wished to achieve by the legislation (see the comments of Finlay C.J. in McGrath v. McDermott [1988] IR 258, at p. 276).

115. Third, and to that end, the words of a statute are given primacy within this framework as they are the best guide to the result the Oireachtas wanted to bring about. The importance of this proposition and the reason for it, cannot be overstated. Those words are the sole identifiable and legally admissible outward expression of its members' objectives: the text of the legislation is the only source of information a court can be confident all members of parliament have access to and have in their minds when a statute is passed. In deciding what legal effect is to be given to those words their plain meaning is a good point of departure, as it is to be assumed that it reflects what the legislators themselves understood when they decided to approve it.

116. Fourth, and at the same time, the Oireachtas usually enacts a composite statute, not a collection of disassociated provisions, and it does so in a pre- existing context and for a purpose. The best guide to that purpose, for this very reason, is the language of the statute read as a whole, but sometimes that necessarily falls to be understood and informed by reliable and identifiable background information of the kind described by McKechnie J. in Brown. However - and in resolving this appeal this is the key and critical point - the ‘context’ that is deployed to that end and ‘purpose’ so identified must be clear and specific and, where wielded to displace the apparently clear language of a 20 provision, must be decisively probative of an alternative construction that is itself capable of being accommodated within the statutory language.”

30. These propositions emphasise that “the words of a statute are given primacy” and that what “the court is concerned to do when interpreting a statute is to ascertain the legal effect attributed to the legislation by a set of rules and presumptions the common law (and latterly statute) has developed for that purpose”.

31. To that end, the plain meaning of the words is a good starting point and then bearing in mind that “the Oireachtas usually enacts a composite statute, not a collection of disassociated provisions, and it does so in a pre-existing context and for a purpose. The best guide to that purpose, for this very reason, is the language of the statute read as a whole, but sometimes that necessarily falls to be understood and informed by reliable and identifiable background information of the kind described by McKechnie J. in Brown.” Murray J. then concludes this element of his judgment by stressing that “the ‘context’ that is deployed to that end and ‘purpose’ so identified must be clear and specific and, where wielded to displace the apparently clear language of a provision, must be decisively probative of an alternative construction that is itself capable of being accommodated within the statutory language.”

32. Murray J. restates at para 106 of Heather Hill the essential points made by McKecknie J. in Brown as follows:-

“(i) The first and most important port of call is the words of the statute itself, those words being given their ordinary and natural meaning (at paras. 92 and 93).

(ii) However, those words must be viewed in context; what this means will depend on the statute and the circumstances, but may include ‘the immediate context of the sentence within which the words are used; the other subsections of the provision in question; other sections within the relevant Part of the Act; the Act as a whole; any legislative antecedents to the statute/the legislative history of the Act, including … LRC or other reports; and perhaps … the mischief which the Act sought to remedy’ (at para. 94). 21 (iii) In construing those words in that context, the court will be guided by the various canons, maxims, principles and rules of interpretation all of which will assist in elucidating the meaning to be attributed to the language (see para. 92).

(iv) If that exercise in interpreting the words (and this includes interpreting them in the light of that context) yields ambiguity, then the court will seek to discern the intended object of the Act and the reasons the statute was enacted (at para. 95).”

33. Murray J. then states at para. 108 that:-

“It is also to be noted that while McKechnie J. envisaged here two stages to an inquiry – words in context and (if there remained ambiguity), purpose – it is now clear that these approaches are properly viewed as part of a single continuum rather than as separated fields to be filled in, the second only arising for consideration if the first is inconclusive. To that extent I think that the Attorney General is correct when he submits that the effect of these decisions – and in particular of Dunnes Stores and Bookfinders – is that the literal and purposive approaches to statutory interpretation are not hermetically sealed. Indeed McKechnie J. later suggested as much in Brown (at para. 95) (and see more recently O’Sullivan v. Ireland [2019] IESC 33, [2020] 1 IR 413, 443 per Charlton J.) and Dunnes Stores (‘subject matter .. and the object in view … will inform the meaning of the words, phrases or provisions in question’).” (Underlined for emphasis)

34. Finally, as Maguire, 2025 on Irish Capital Gains Tax 2025 notes at para 2.01:-

“General principles of interpretation

[2.01]. There is substantial authority for the proposition that the normal canons of statutory interpretation apply to tax statute. Thus, in Revenue Commissioners v Doorley VITR 539, Kennedy CJ cited with approval the words of Lord Russell

22 in Attorney General v Carlton Bank [1899] 2 QB 158, where the latter had stated that:

‘… I know of no authority for saying that a tax Act is to be construed differently from any other Act. The duty of the court is … in all the cases the same … namely to give effect to the intention of the legislature as that intention is to be gathered from the language employed having regard to the context in connection with which it is employed’ (emphasis added).

Thus, it is sound interpretative practice to construe words and phrases in the light of the statute taken as a whole, taking into account the general legal and factual background against which it is designed to operate (see for example East Donegal Co-Op v Attorney General [1970] IR 317; Maunsell v Olins [1975] AC 373).

Nevertheless, in applying these principles, the courts are influenced by the fact that tax law is founded on statute. There is no such thing as a recognised common law of taxation in contrast to other branches of the law, such as criminal law or the law of tort. Accordingly, any tax charge must be justified by reference to the terms of the relevant statutory provisions.”

35. In the context of the specific provisions in force at the relevant time of the events the subject of this Case Stated, the Court also has the considerable benefit of the Supreme court decision in Revenue v O’Flynn Construction [2013] 3 IR 533 which considers the predecessor to section 811. Section 86 of the Finance Act, 1989 was the original statutory anti-avoidance provision and was introduced after the Supreme Court decision in McGrath v McDermott [1988] IR 258 where the Supreme Court declined to counter a transaction in the absence of a general anti-avoidance statutory provision and accordingly declined to adopt the approach of the House of Lords in Ramsey v IRS [1982] AC 300.

36. In addition, and after the TAC hearing and the Case Stated was submitted to the High Court, this Court now has the benefit of the comprehensive Court of Appeal decision in 23 Hanrahan v Revenue Commissioners [2024] IECA 113 which considers section 811 in detail.

37. These specific tax cases (McGrath, O’Flynn and Hanrahan) are best considered later in this judgment in the context of the application of the principles of statutory interpretation to the particular statutory provisions in issue.

(ii) Curial Deference & the role of the High Court on a Case Stated 38. The matter has recently been helpfully considered by Cahill J. in Niall Hade v Revenue Commissioners [2025] IEHC 385 at para.s 29-30 where she states:-

“… this question of curial deference should not be overstated and must be read in light of the judgment of the Court of Appeal in Stanberry Investments Limited v. Commissioner of Valuation [2020] IECA 33 (Murray J., Haughton and Power JJ. concurring) and, in particular, in light of the following paragraph from the judgment of Murray J. in that case:

“The Commissioner says in this case, as parties in a similar position frequently do, that the Court should be “slow to interfere with the decisions of expert administrative Tribunals”. Without significant qualification, this statement is apt to mislead. Administrative tribunals, expert or otherwise, obtain no deference on pure issues of law (see Millar v. Financial Services Ombudsman [2015] IECA 126 [2015] 2 IR 156 at - in particular - para. 62). The remarks of Kelly J. in Premier Periclase Limited v. Commissioner of Valuation [1999] IEHC 8, makes it clear that errors of fact simpliciter do not present any issue of curial deference either; “[w]hen conclusions are based on an identifiable error of law or an unsustainable finding of fact by a Tribunal, such conclusions must be corrected” (at para 25). A similar statement of principle appears in Nangles Nursery v. Commissioner of Valuation [2008] IEHC 73 at para. 25. It follows that in both judicial review proceedings, and appeals on a point of law, the scope for ‘deference’ is limited.” (para. 49)

24 As the Court of Appeal underlined in that case, there is no “supercharged presumption of validity”. On the contrary “[d]eference means that in those areas touching on the Tribunal’s expertise, the Court should be slow to interfere with the Tribunal’s reasoning” (para 52). This does not allow for any deference on questions of law, such as those presented in the Case Stated here.” (underlined for emphasis).

(iii) Relevant Statutory Provisions 39. The following are the statutory provisions from the TCA 1997 as they were in force at the time which are the most relevant to the issues in this Case Stated:-

Section 811(2) 811(2) For the purposes of this section and subject to subsection (3), a transaction shall be a "tax avoidance transaction" if having regard to any one or more of the following -

(a) the results of the transaction, (b) its use as a means of achieving those results, and (c) any other means by which the results or any part of the results could have been achieved,

the Revenue Commissioners form the opinion that –

(i) the transaction gives rise to, or but for this section would give rise to, a tax advantage, and (ii) the transaction was not undertaken or arranged primarily for purposes other than to give rise to a tax advantage,

and references in this section to the Revenue Commissioners forming an opinion that a transaction is a tax avoidance transaction shall be construed as references to the Revenue Commissioners forming an opinion with regard to the transaction in accordance with this subsection.

Section 811(3)(a)(i) and (ii) 25 811(3) (a) Without prejudice to the generality of subsection (2), in forming an opinion in accordance with that subsection and subsection (4) as to whether or not a transaction is a tax avoidance transaction, the Revenue Commissioners shall not regard the transaction as being a tax avoidance transaction if they are satisfied that -

[the Business Exclusion] (i) notwithstanding that the purpose or purposes of the transaction could have been achieved by some other transaction which would have given rise to a greater amount of tax being payable by the person, the transaction – (I) was undertaken or arranged by a person with a view, directly or indirectly, to the realisation of profits in the course of the business activities of a business carried on by the person, and (II) was not undertaken or arranged primarily to give rise to a tax advantage, or

[The Relief Exclusion] (ii) the transaction was undertaken or arranged for the purpose of obtaining the benefit of any relief, allowance or other abatement provided by any provision of the Acts and that the transaction would not result directly or indirectly in a misuse of the provision or an abuse of the provision having regard to the purposes for which it was provided.

811(3)(b) In forming an opinion referred to in paragraph (a) in relation to any transaction, the Revenue Commissioners shall have regard to - (i) the form of that transaction, (ii) the substance of that transaction, (iii) the substance of any other transaction or transactions which that transaction may reasonably be regarded as being directly or indirectly related to or connected with, and (iv) the final outcome and result of that transaction and any combination of those other transactions which are so related or connected.

26 Section 31 Capital gains tax shall be charged on the total amount of chargeable gains accruing to the person chargeable in the year of assessment, after deducting - (a) any allowable losses accruing to that person in that year of assessment, and (b) in so far as they have not been allowed as a deduction from chargeable gains accruing in any previous year of assessment, any allowable losses accruing to that person in any previous year of assessment (not earlier than the year 1974-75).

Section 546 (1) Where under the Capital Gains Tax Acts an asset is not a chargeable asset, no allowable loss shall accrue on its disposal.

(2) Except where otherwise expressly provided, the amount of a loss accruing on a disposal of an asset shall be computed in the same way as the amount of a gain accruing on a disposal is computed.

(3) Except where otherwise expressly provided, the provisions of the Capital Gains Tax Acts which distinguish gains which are chargeable gains from those which are not, or which make part of a gain a chargeable gain and part not, shall apply also to distinguish losses which are allowable losses from those which are not, and to make part of a loss an allowable loss and part not, and references in the Capital Gains Tax Acts to an allowable loss shall be construed accordingly.

(4) A loss accruing to a person in a year of assessment for which the person is neither resident nor ordinarily resident in the State shall not be an allowable loss for the purposes of the Capital Gains Tax Acts unless under section 29(3) the person would be chargeable to capital gains tax in respect of a chargeable gain if there had been a gain instead of a loss on that occasion.

(5) Except where provided by section 573, an allowable loss accruing in a year of assessment shall not be allowable as a deduction from chargeable gains in any earlier year of assessment, and relief shall not be given under the Capital Gains Tax Acts - (a) more than once in respect of any loss or part of a loss, and

27 (b) if and in so far as relief has been or may be given in respect of that loss or part of a loss under the Income Tax Acts.

(6) For the purposes of section 31, where, on the assumption that there were no allowable losses to be deducted under that section, a person would be chargeable under the Capital Gains Tax Acts at more than one rate of tax for a year of assessment, any allowable losses to be deducted under that section shall be deducted - (a) if the person would be so chargeable at 2 different rates, from the chargeable gains which would be so chargeable at the higher of those rates and, in so far as they cannot be so deducted, from the chargeable gains which would be so chargeable at the lower of those rates, and (b) if the person would be so chargeable at 3 or more rates, from the chargeable gains which would be so chargeable at the highest of those rates and, in so far as they cannot be so deducted, from the chargeable gains which would be so chargeable at the next highest of those rates, and so on.

Section 607 (1)(a) (1) The following shall not be chargeable assets - (a) securities (including savings certificates) issued under the authority of the Minister for Finance,

VI. SUBMISSIONS (i) Submissions on behalf of the Taxpayers 40. The Court received very helpful written and oral submissions on behalf of the Taxpayers. Essentially eight main points were advanced as to why the TAC had erred in law.

41. Firstly, it was submitted that the TAC had wrongly concluded in para. 55 of the Determination that the Revenue’s expert had been unwilling to concede that the transactions were or could be seen as “hedging”. It was submitted that this was flatly unsustainable based on the fact, as recorded in the transcript of the hearing before the TAC, that he had actually conceded this point. Related to this, it was contended that the Revenue and the TAC were conflating the issue of whether the transactions had a commercial purpose with the issue of whether they could be engaged in separately. In 28 addition, it was also contended that the reasons set out in para. 112 of the Determination (which are stated by the TAC to be reasons for discounting the Taxpayers’ argument that the transactions were entered into as a hedge against each other) indicated that the TAC had misunderstood some critical elements of the evidence. For example, it was contended that the fact that the transactions had the same trade, settlement and expiry dates was actually consistent with the concept of “hedging” as opposed to being a basis for discounting that proposition. Connected with this submission, was the contention that both transactions viewed separately clearly had a commercial purpose. The Gilts transaction had a high probability of making a profit. On the other hand, while the FECDs had a low chance of making a profit, this profit might nonetheless be very substantial and the potential losses on the FECDs were capped at €10M.

42. Secondly, it was submitted that even if there was any room for a finding that the Revenue’s expert had held to a position that these transactions were not hedging, then the TAC had erred in law in not giving any, or any clear, reasons for why he had preferred one side’s expert over the other. According to this submission, both experts had given reasons for their opinions and it was an error of law not to give a reasoned analysis for why the Revenue’s expert was being preferred to the Taxpayers’ expert. This was secondary to the submission that the Determination itself indicated that the TAC was not consciously departing from the evidence of the experts.

43. Thirdly, it was submitted these errors fatally compromised the TAC’s conclusion in para 116 of the Determination that the transactions had no commercial motive other than the deemed tax advantage derived. This was so, it was submitted, because the only reason given by the TAC for this conclusion was that the TAC “was unable to identify any commercial motive for the investment”. That reasoning fell apart, it was contended, because it was based on the erroneous approach taken to the experts’ evidence described in points one and two above. In addition, this conclusion was flawed, it was submitted, because the TAC (and the Revenue) conflated the issue of whether there was a commercial purpose to the transactions with the separate issue of whether the two sets of transactions (the Gilts and FECDs) had to be taken together or could be viewed separately. In other words, the Taxpayers submitted that even if the transactions were only ever likely to be taken out together, that did not mean that they did not, nonetheless, have a commercial purpose. In the context of considering the purpose of the 29 transactions, it was also submitted that the TAC had made a fundamental error in accepting the evidence of the Revenue’s expert on ‘probability’ as this expert was not an expert on ‘probability’ and could not therefore offer admissible opinion evidence on the subject. Allied to this was the submission that the TAC had made a conclusion on the ‘probability’ issue by reference to the outcome, which was a form of a priori reasoning that was sufficiently illogical to be an error of law.

44. Fourthly, independently of the first three points, it was submitted that the TAC made a fundamental error of law in his approach to the important consideration of the Relief Exclusion contained in section 811(3)(a)(ii). This error, it was submitted, was to conclude that the burden (the “positive obligation”) was on the Taxpayers to prove that the claiming of the benefits of the relief and allowances provided by sections 607 and 31 did not involve a misuse or abuse of those provisions. This was, it was submitted, clearly an error of law by virtue of the Court of Appeal decision in Hanrahan. The statutory necessity - created by the Relief Exclusion in section 811(3)(a)(ii) - to have regard to the purpose of the relief provision (for example section 31) was a legal requirement on the TAC and not a matter for the Taxpayers to “prove”. It was submitted that this error was critical to the TAC’s conclusion in para. 118 of the Determination that because the Taxpayers had failed “to satisfy this requirement [of proof]” that “[t]herefore, it is not clear how the [Taxpayers] can succeed when there was no articulation of the purpose of section 31 TCA 1997”.

45. Fifthly, it was submitted that, combined with or even irrespective of the previous points, the TAC had erred in law in concluding, as a matter of interpretation of sections 607 and 31, that the transactions did in any event amount to an abuse or misuse of those provisions. It was submitted that the findings of fact set out earlier in the Determination demonstrated that real gilts had been bought and then sold; real foreign currency CFDs had been entered into and transacted creating actual losses. Even, it was submitted, if the primary purpose of these transactions was to gain a “tax advantage” then there had been no abuse or misuse of the relevant provisions. It was submitted that the TAC appeared to conclude that if the primary purpose of the transactions were to avoid tax that this in itself meant that the transactions could not avail of the Relief Exclusion. It was submitted that this was a misreading of section 811(3)(a)(ii). In addition, the TAC’s conclusion that the losses were not “actual monetary losses” (per para. 119 of the 30 Determination) was not sustainable and involved an incorrect interpretation and application of the provisions. It was submitted that the actual material facts as found by the TAC showed actual transactions involving actual gains and losses. Accordingly, the real issue was around the interpretation of the purpose of the relief provisions and the meaning and application of the words “misuse” and “abuse” in section 811(3)(a)(ii).

46. Sixthly, it was submitted that the TAC’s overall approach to the interpretation of the relevant legislative provisions was deficient. By virtue of the error in considering that there was a burden on the Taxpayers, it was contended that there had been no proper consideration by the TAC of the “purpose” of the relevant provisions providing the reliefs and allowances claimed. Nor was a proper approach taken, it was submitted, to considering the interpretation to section 811 and section 811(3)(a)(ii) in particular. The reasoning of the TAC as expressed in para 121 of the Determination that the transactions “could not have been envisaged by the Oireachtas in enacting … section 31” was not a correct approach to statutory interpretation it was submitted. This articulation of an exercise in statutory interpretation was legally in error it was contended as it involved replacing a proper search for the meaning of the relevant legislation according to the well-established principles governing the exercise of statutory interpretation with simply the TAC’s own view of what the provisions should mean in this particular case by means of imagining whether the Oireachtas could have envisaged these types of transactions. That latter approach was an approach not known to law, it was submitted, and it was particularly flawed as it permitted the judicial decision maker to essentially apply their own subjective view to the problem.

47. Seventhly, the Taxpayers contended that their interpretation of the relevant provisions, and in particular section 31, was consistent with, and if necessary should be informed by examining, the amendment made to the legislation in 2010 by means of the introduction of section 546A of the TCA 1997 which was introduced by section 59 of the Finance Act, 2010. This amendment should be relied upon by the Court even though it postdates the events, it was contended, to assist with the interpretation of section 31 in the context of considering its purpose and also in the context of the exercise of considering whether section 31 had been abused or misused within the meaning the Relief Exclusion. The Taxpayers contended that the dicta in the caselaw relied upon by the Revenue, such as Cronin and Bookfinders warning against looking at any 31 subsequent statutory amendments or alterations, were obiter and should not be followed. Legislation should be viewed coherently and it was, they submitted, appropriate, if necessary (such as in a case of any doubt or ambiguity), to have regard to a subsequent amendment on the grounds that it should be assumed that the subsequent amendment was rationally to be considered as necessary and to have a purpose. Accordingly, the Court should construe the relevant provisions by reference to this subsequent amendment and that, if it did so, this subsequent amendment demonstrated that the transactions of the Taxpayers essentially fell into a “gap” that this subsequent amendment closed. Accordingly, it followed that these transactions were not covered by the provisions in force at the time they were entered into.

48. Finally, in relation to the advisor’s fee point, the Taxpayers simply stood on what was set out in their written submissions:-

“7.1 It is submitted that the Commissioner erred at §125 of the Determination in deeming that the deduction of advisor’s fees is not possible as they are “deemed unconnected with the transactions”. The fees incurred by the Appellant were incurred in connection with their entry into the Transactions.

7.2 Under section 552, the sums allowable as a deduction from the consideration in the computation of a gain accruing on the disposal of an asset includes “the incidental costs to the person of making the disposal”. Revenue’s guidance (Tax and Duty Manual, Part 19-02-10, October 2023) states that this includes “Fees paid to a professional adviser … to the extent that they are directly referable to the cost of acquiring or disposing of each particular investment.” On the basis that the professional advisor fees incurred by the Appellant were directly related to the entry into of the Transactions, and the acquisition and disposal of gilts and foreign currency under the GFC and FECD, those fees should be deductible in computing the chargeable gain or allowable loss arising in connection with the Transactions.”

(ii) Submissions on behalf of the Revenue 49. The Court received very helpful written and oral submissions on behalf of the Revenue. Essentially eleven main points were advanced as to why the TAC had not erred in law. 32 50. The first point was one of approach. It was contended in the oral submissions made on behalf of the Revenue that the Court should, in a case involving section 811, “step in the shoes” of the TAC and decide whether the opinion that these were tax avoidance transactions was “well held”. This contention was based on what is set out in section 811(1)(b) which provides that:- “(b) In subsections (2) and (3), for the purposes of the hearing or rehearing under subsection (8) of an appeal made under subsection (7) or for the purposes of the determination of a question of law arising on the statement of a case for the opinion of the High Court, the references to the Revenue Commissioners shall, subject to any necessary modifications, be construed as references to the Appeal Commissioners or to a judge of the Circuit Court or, to the extent necessary, to a judge of the High Court, as appropriate.”

51. According to this argument, “the ultimate question that is being asked of the Court is as to whether there was or wasn’t a tax avoidance scheme” (Day 2, page 40 of the Transcript of the hearing in the High Court).

52. The potential attraction of this argument was that issues around how the TAC dealt with the expert evidence or reached his conclusions were not central and the Court could simply re-do the exercise based on the Material Facts in the Determination.

53. Next, on behalf of the Revenue it was submitted that the Court should have no regard to the subsequent amendment contained in section 546A introduced in 2010. The legislation in force at the time of the transactions should not be interpreted by reference to a subsequent amendment and to do so would conflict with the dicta of Griffin J. in Cronin v Cork & County Property Company Ltd.[1986] 1 IR 559 which has been consistently endorsed thereafter.

54. In any event, it was contended that the specific anti-avoidance rule contained in the subsequent amendment in section 546A did not undermine or alter the general anti- avoidance rule contained in section 811 and this general proposition was clear from para.s 113 and 115 of the Court of Appeal decision in Hanrahan and the Supreme Court decision in O’Flynn. 33 55. Thirdly, it was submitted that the Material Facts provided ample evidence for the conclusions of the TAC that these transactions should be viewed collectively. For example, the fees for both transactions were priced into the Gilts transactions only. When viewed as interdependent, the transactions had no obvious commercial reality. Even the FECD transactions when looked at on their own had no commercial logic (see para 47 of the Revenue’s written submission). The rationale for this was explained in the Revenue’s submissions where it was submitted: “[t]he fact that the FECD transaction had a high probability of generating a loss cannot give rise to a commercial logic” (see para. 43 of the Revenue’s written submissions). One set of transactions would always essentially cancel out or set off the other. The TAC’s conclusion that the purpose was to obtain a tax advantage by creating a loss for CGT purposes was clearly open to the TAC whatever way the matter was looked at.

56. Fourthly, the Revenue submitted that their expert had rejected the argument of the Taxpayers’ expert that the transactions had a hedging purpose. Counsel for the Revenue pointed to what the Revenue’s expert had said in his direct evidence and in other parts of his cross examination where he stressed that the two sets of transactions were interdependent. According to this submission, if the Revenue’s expert appeared to concede they were hedges, in truth he meant not a typical hedge which would be a risk reduction transaction designed to moderate the risk associated with an underlying standalone transaction. Therefore the TAC’s conclusion in para. 55 of the Determination was perfectly fine.

57. Fifthly, the Revenue submitted that section 811(3)(b) meant that the TAC (and the Court) had to look at the transactions holistically and look at the end result and then come to a view as to whether that “end result” was “effectively a misuse or abuse” (Day 2, pages 31-32). In relation to section 607 it was contended that this section had been misused and/or abused because the Gilts transactions were carried out solely “so as to misuse section 31 in order to artificially generate a loss to enable the [Taxpayers] to avoid tax”, per para. 58 of the Revenue Submissions. This had, it was contended in para. 60 of the Revenue’s Submissions, a similarity to what happened in Hanrahan:-

34 “It is evident that the Transactions were designed to take advantage of the exemption provided for in s.607, just as the deeming provision of s.549 was relied upon by the taxpayer in Hanrahan. The Transaction relied on s.607 with the sole purpose of facilitating the creation of a loss, which was not the purpose of s.607. As the loss was not real or monetary this gave rise to an abuse or misuse of s.31. The Commissioner was correct in his determination.”

58. Sixthly, the Revenue submitted that following the history of the caselaw, section 811 represents the introduction of a general anti-avoidance rule (“GAAR”) that came in after the Supreme Court decision in McGrath v McDermott. In that context, the English cases of Ramsey v IRC [1981] STC 174 and Schofield v Revenue [2012] STC 2019 represent useful examples of the kind of schemes where offsetting transactions are deployed to create “artificial” losses. That is what was happening here, it was contended.

59. Seventhly, it was contended that, in relation to the issue of the burden of proof, the TAC’s decision on this had to be viewed in the context that it was delivered prior to the Court of Appeal decision in Hanrahan. Even if it was an error, nothing flowed from the error as, in any event, the TAC “analyses section 811(3) himself to decide whether there was an abuse, a misuse or abuse of the section” (Day 2, page 11). In addition, in their written submissions at para. 55 it was contended that this error was of no consequence as it did not feature as a relevant matter in any of the questions contained in the Case Stated.

60. Next, the Revenue countered that there was no fundamental error in relation to the analysis of the probabilities and that it was rational to look at the actual outcomes in the context of an overall analysis of whether the transactions had a commercial purpose. In that regard, the Revenue submitted that actually their expert’s view broadly aligned with the view of the Taxpayers; at para. 70 of the Revenue’s submissions they state:-

“Importantly, the volatility figures provided by Schroders and relied upon by the [Taxpayer] broadly aligned with [the Revenue expert’s] evidence (90% probability of sustaining losses).”

35 61. Next, the Revenue submitted that when the transactions were looked at more closely “there was no foreign currency element at all” and the transactions were linked to the Euro Stoxx 50 Index and were simply two sides of the same coin. Support for this submission was to be found in the report of the Revenue’s expert. The gist of this submission was potentially twofold. Firstly that there was no real foreign currency transaction at all, and/or secondly that movement in the currency exchange rates was not determinative of the outcome of the FECDs but rather, the outcome was linked to movement in the Euro Stoxx 50 Index.

62. Next, the Revenue submitted that applying O’Flynn and Hanrahan the TAC had come to the legally correct conclusion. While it was accepted that, absent section 811, the losses on the FECD transactions would be allowable under section 31, it was submitted that the losses were not “real” but were “artificial” and “contrived” and were accordingly an abuse and/or misuse of the relevant relief provisions.

63. Finally, in relation to the “advisor’s fees” point that Revenue’s written submissions were relied upon which state at para.s 72-73:-

72. The Appellant did not provide evidence to demonstrate that the advisor fees related to the transactions. On the contrary a letter was opened (Day 1 p 111 L28 – p 112 L5) wherein it was stated that the Matheson and BDO fees were not claimed as deductions, BDO stating that the costs did not relate to the purchase and sale of the gilts.

73. The Commissioner was correct in determining that the advisor fees were not allowable as there was no evidence to connect them to the transaction.

VII. DECISION 64. Taking account of the submissions and the questions raised in the Case Stated I propose to address the following matters and to indicate the Court’s decision in relation to each. Thereafter I will set out how these decisions answer the questions raised in the Case Stated. The ten issues are:-

(i) the role of the Court in this Case Stated; 36 (ii) the assessment of the evidence of the experts;

(iii) lack of reasons for preferring the evidence of the Revenue’s expert;

(iv) fundamental errors of law in the conclusions of the TAC;

(v) error in relation to the burden in respect of section 811(3)(a)(ii), the Relief Exclusion;

(vi) were the transactions a “misuse” or “abuse” of sections 607 and 31?

(vii) reliance on the subsequent amendment by way of the introduction of section 546A;

(viii) the submission of Revenue that “there was no foreign currency element at all”;

(ix) the question in the Case Stated around whether the TAC had erred by following authorities from the UK rather than established Irish precedent to the contrary; and

(x) the issue as to whether the fees should have been deducted.

(i) The role of the Court in this Case Stated 65. The first issue to consider is the argument of the Revenue made in oral submissions during the hearing that the role of the Court on this Case Stated should be to “step in the shoes” of the TAC and decide whether the opinion that these were tax avoidance transactions was “well held”. This contention was based on what is set out in section 811(1)(b). Counsel for the Revenue contended that section 811(1)(b) required the Court on a Case Stated to essentially step into the shoes of the Revenue and the TAC (who are tasked with forming an ‘opinion’).

66. Section 811(1)(b) provides that:- 37 “(b) In subsections (2) and (3), for the purposes of the hearing or rehearing under subsection (8) of an appeal made under subsection (7) or for the purposes of the determination of a question of law arising on the statement of a case for the opinion of the High Court, the references to the Revenue Commissioners shall, subject to any necessary modifications, be construed as references to the Appeal Commissioners or to a judge of the Circuit Court or, to the extent necessary, to a judge of the High Court, as appropriate.”

67. In relation to whether section 811(1)(b) has an effect on the normal approach to a Case Stated it appears that this issue also arose to some degree during the submissions made in the Supreme Court in O’Flynn. O’Donnell J. (as he then was), who delivered the majority judgment, at para 47 states as follows:-

“There was some argument as to the standard of review to be applied by the High Court and the Supreme Court on appeal in circumstances where the section required the Revenue Commissioners and the Appeal Commissioners to be of an opinion. While in different circumstances that issue might become central to the courts’ determination, it seems clear that here the issue is one as to the true interpretation of s. 86(3)(b) and its application to facts in this case, which are not in dispute. Accordingly the issue is one of statutory interpretation, and therefore an issue of law, and no question of deference to the findings of fact or inferences drawn by either the Revenue Commissioners or the Appeal Commissioners arises.”

68. McKechnie J. in O’Flynn also addresses this topic. While he delivered a dissent, it does not appear that his comments on this point were in dispute. He states as follows about the equivalent provision that was contained in section 86 of the Finance Act, 1989 at para.s 141-143:-

“ … Under s. 86(1)(b), all references to the “Revenue Commissioners” in subs. 2 and 3, and in the appeal provisions above mentioned, shall, subject to any necessary modification, be considered as referring to the Appeal

38 Commissioners, to a judge of the Circuit Court or, to the extent necessary, to a judge of the High Court, as may be appropriate.

From such provisions it is quite clear that the jurisdiction of the Appeal Commissioners is not one of review, regardless of standard, but rather is one of rehearing based on the evidence previously adduced before the Revenue Commissioners and such further evidence as may be given before them. They therefore form their own opinion as to whether the transaction is an avoidance one. One direct and immediate consequence of this is that the failure, in itself, of the nominated officer to give evidence before the Appeal Commissioners is irrelevant. It matters not. The Appeal Commissioners are mandated to form their own opinion on the evidence available, wherever and from whomsoever that emerges. Therefore, the submission made by the appellants in this regard cannot succeed.

The position of the Circuit Court does not arise for consideration: that of the High Court is governed by the normal rules applicable to its jurisdiction to advise on points of law having been requested to so do by way of case stated. This court on appeal is in a like situation. Matters such as those raised in Mara v. Hummingbird Ltd. [1982] I.L.R.M. 421 do not arise: the test is simply one of legal correctness.”

69. Accordingly, the view expressed on this issue is to the effect that the position of the High Court “is governed by the normal rules applicable to its jurisdiction to advise on points of law having been requested to so do by way of case stated.”

70. Notwithstanding the oral submissions made on behalf of the Revenue during the hearing (that the High Court should step into the shoes of the TAC), the written submissions of the Revenue placed reliance on a dicta of Twomey J. in Byrne v. Revenue Commissioners [2021] IEHC 262, where Twomey J. stated as follows at para.s 59-60:-

“59. In considering this issue, it is important to bear in mind that this is an appeal on a point of law by way of Case Stated under s. 949AQ of the Taxes

39 Consolidation Act, 1997 (as amended). As such the role of this Court is not to determine whether the Commissioner was right or wrong ...

60. This is because this is not an appeal and it is not the function of this Court to replace the view of the Commissioner with this Court’s view, even if this Court were of the view that a connection with VAT fraud was not the only reasonable explanation for the purchase of the fuel by Mr. Byrne.” (underlined for emphasis).

71. Taking account of these authorities I am not persuaded by the oral submissions made on behalf of the Revenue that this Court should “step in the shoes” of the TAC and form an opinion pursuant to section 811 on the transactions. That would be to replace the view of the TAC with the view of the Court. As McKechnie J. points out in O’Flynn, the role of the Court is to advise on the specific points of law which have been raised by the TAC in the Case Stated. Accordingly, this Court does not propose to seek to form its own opinion of the transactions under section 811.

(ii) The assessment of the evidence of the Experts 72. While most of the issues relevant to this Case States concern pure issues of law, one issue raised by the Taxpayers concerned the manner in which the TAC had considered the evidence of the experts called at the TAC hearing and reached conclusions thereon. It is necessary therefore to set out some extracts from the evidence and to refer to how the Determination addressed that evidence. The purpose here is not with a view to this Court forming its own view on the evidence, but rather to assess the manner in which the TAC reached conclusions on that evidence and to assess whether they amount to an error of law, within the meaning of the jurisprudence, and then to consider how material any such error might be.

73. The nub of this ‘expert evidence’ issue was whether or not the Revenue’s expert had agreed in cross-examination that each transaction (namely the purchase of the Gilts and the separate purchase of the FECDs) could be seen as a “hedge” of the other and thereby have a commercial purpose.

40 74. To put this in context, it is useful to summarise the position based on the accepted facts about these transactions. The evidence indicated that the structure of the transactions was such that the probability was that the Taxpayer would make a profit on the Gilts transaction. There was a risk (the likelihood of which happening was probably 10% according to the evidence; see the written Submissions of the Revenue at para. 70) that the Gilts transaction would make a loss. It all depended on the movement of the Euro Stoxx 50 Index. The Euro Stoxx 50 Index was also the key variable that would determine the outcome of the FECD transactions. However, it was not a perfect mirror, for two reasons. Firstly, the outcome of the Gilts transactions in ordinary course attracted a different tax treatment by virtue of section 607 TCA. Secondly, the FECD transactions, if they made a loss, had a cap on those losses of €10million. Specifically, if the Gilts transaction made a loss then two things at least arose. Firstly, the FECD transaction was structured so that the very same movement in the Euro Stoxx 50 Index would trigger a profit on the foreign currency contracts. This profit would largely cover, from a cash point of view, the Gilts losses. This formed the basis of the proposition that it “hedged it”, in effect. However, there would be a further problem. In this scenario, the Gilts loss would not be “allowable” as against other chargeable gains of the Taxpayer. To make matters worse, the Taxpayer would now have an additional chargeable gain, namely the profit on the FECD transactions. This scenario was explained by Counsel for the Taxpayers during Day 1 of the hearing (having taken instructions) and was not objected to or disputed by the Revenue. Nonetheless, the probability was that the Euro Stoxx50 Index would move in a way that meant the likelihood was (90% likely, according to evidence given by the experts) that the Gilts transaction would make a gain (which would not, by virtue of section 607 TCA 1997, be chargeable to CGT) and this cash gain would cover (or ‘hedge’ in the opinion of the Taxpayers’ expert) the likely losses on the FECD transactions which would be allowable, from the Taxpayers’ perspective, against other CGT gains of the Taxpayers.

75. The Taxpayers maintained, and called an expert witness to support the position, that each transaction on its own terms had a commercial purpose, but that in addition when viewed together each could be seen as having a legitimate commercial purpose of hedging the other transaction. One trade was protecting the other against movements in the Euro stocks 50 index. Both experts agreed that in principle ‘hedging’ is a perfectly legitimate commercial purpose and is “a common feature of investment”. However it 41 is not for this Court to decide as to whether or not the purpose of these transactions was hedging. The issue here is to consider whether or not the TAC made an error, amounting to an error of law, in his assessment of the expert evidence on that question.

76. In this context the Revenue’s expert said the following in cross-examination on Day 2 of the TAC hearing:-

45 Q. Yes. And hedging of course is a completely common feature of investment, isn't that so? A. That's fine. 46 Q. And it is entirely rational? A. That's -- I'm good with that, but there is a limit to where I would go on all this. 47 Q. Sorry do you want to add something, Mr. Stanton? A. Well, which is that, I am happy to accept or agree that the Gilt Forward and the CFD were equal and opposite transactions, and to that extent if you wanted to use the word "hedge" you could say one is a hedge of the other. But I would say that, if you are going to use that word hedge, I would bring in my proviso that it is a hedge within a transaction, but on the basis that both of those transactions are undertaken together, which is different from looking at one transaction and then plonking a hedge on top of it. So I think we are agreed that the effect of the two transactions, again if you wanted to use the word hedge, one is a hedge, one can be regarded as a hedge of -- the CFD can be regarded as a hedge of the Gilt Forward, or the Gilt Forward can be regarded as a CFD, can be regarded as a hedge of the other, if you wanted to use that word. But that doesn't, I don't think you can then extend that, which I think is the suggestion here, that one of those transactions could, therefore, be undertaken by itself. 48 Q. Hmm, well, we're going to come to that? A. Okay. 49 Q. But can we see if we can agree this much then; that it is legitimate to view one of these as a hedge of the other? A. Again I am not quite sure what the significance of the hedge is. I am very happy to agree that one knocks out the profits and losses of the other, and

42 therefore removes the risk whichever way you look at it. If you want to use the word "hedge" I am okay to do it... 50 Q. It's not that I want to use the particular word, Mr. Stanton, I am suggesting to you that in the investment world this is properly understood as a hedge, because hedging is a very broad concept. And the particular feature which you identified in your report is not a definitional requirement of hedging; namely, that one transaction will necessarily be carried out in its own right. A. I wasn't intending my comment to be definitional in that sense. 51 Q. But could I suggest to you that your reluctance in your report, and yesterday in your evidence, to describe this as hedging depended on that very proposition? A. I am not quite sure I follow that. As I said to you, I don't mind using the word "hedge" in the sense that it is clear that the CFD did hedge the gilt sale, the gilt sale did hedge the -- sorry, whichever way, the gilt sale hedged the CFD or the CFD hedged the gilt sale, but I can't then extrapolate. That's subject to the proviso, in my view both contracts were undertaken together or not at all, which I see, and this is not intended to be a definition, as somewhat different from an underlying transaction that someone is going to do and then takes the decision whether or not to hedge that.” (Underlined for emphasis).

77. In assessing the evidence of the experts the TAC found as follows in the Determination at para.s 54-55:-

“54. When questioned by the Respondent’s Counsel regarding the probability of the transactions falling within the range outlined in the formula, the Respondent’s witness stated that although Schroders and their advisors had stated that there was a 90% probability of this occurring, he was of the view that it was in fact a 95% probability and this was demonstrated by his analysis of all of the transactions undertaken by all of the Appellants which proved this figure as correct. While the Appellants’ Counsel objected to the Respondent’s witness giving evidence on probability, as he was not an expert in that field, the Commissioner found that those figures proven as the Respondent’s witness’s evidence was backed up by the transactional analysis included within his report. 43 55. Under cross examination, the Respondent’s witness agreed with the Appellants’ Counsel that while the probability of the GFCs generating profits and the FECDs producing losses was high, that this position was in no way guaranteed by virtue of market volatility. However, while the Respondent’s witness agreed with the Appellants’ Counsel that hedging (“a trading strategy to protect a portfolio position from price fluctuations”) is a completely common feature of investment, he was unwilling to agree that the transactions of a type undertaken by the Appellants was hedging by virtue of his analysis of the financial models upon which the returns or losses were calculated.” (Underlined for emphasis).

78. Faced with the evidence of the actual concessions made by the Revenue’s expert during cross-examination at the TAC hearing, Counsel for the Revenue sought to draw attention to what the Revenue expert had said in direct evidence and then to an aspect of his evidence later in cross-examination where the expert referred to his opinion that the two transactions were always designed and intended to be taken out together. However, specifically it was not suggested that the Revenue’s expert had withdrawn these concessions. Consequently, these four specific concessions could not reasonably be ignored in the context of the conclusion reached by the TAC in para. 55 of the Determination. In addition, the response of the Revenue in its submissions to this argument is flawed as it conflates this issue with the separate issue of whether the Gilts and FECD transactions should be viewed separately or as interdependent.

79. Applying the principles outlined in Mara v Hummingbird, I am satisfied that the TAC’s finding in para. 55 of the Determination that the Revenue’s expert “was unwilling to agree that the transactions of a type undertaken by the [Taxpayers] was hedging” is unsustainable on the facts. This conclusion was not open to the TAC based on the evidence of the Revenue’s expert during cross examination in light of the fact that on four specific occasions the Revenue’s expert accepted that the transactions could be described as one hedging the other. The conclusion of the TAC is either mistaken or is one which, in light of the evidence, is one which no reasonable appeal commissioner could draw.

44 80. Related to this, I am satisfied that the reasoning set out by the TAC in para. 112 of the Determination is flawed. The fact that the transactions had the same trade, settlement and expiry dates is perfectly consistent with a hedging arrangement. Indeed given that the financial outcome of each set of transactions depended on the movement of the Euro Stoxx 50 Index it would have been risky from the perspective of arranging each transaction to be the hedge of the other to have set the transactions up with different trade and settlement dates.

(iii) Lack of reasons for preferring the evidence of the Revenue’s expert 81. Aside from the foregoing, it is of course open to an Appeal Commissioner to prefer one expert’s evidence over the other, or indeed to come to a different conclusion from both experts. However, in either of those scenarios, clear reasons must be given for the choice and decision being made. Accordingly, aside from the error of law identified above, in circumstances where the TAC concluded that the Revenue’s expert had a fundamentally different opinion about whether the transactions could be seen as having a commercial purpose of “hedging” it was still necessary to set out reasons for not accepting the evidence of the Taxpayers’ expert.

82. The question of the approach to be adopted in a Case Stated when considering the reasons given by a statutory body for preferring one expert over another was considered by the Court of Appeal decision in Stanberry, where Murray J. explains that curial deference does not mean that if a Tribunal’s reasoning is unclear that the Court should simply assume that it was correct. Murray J. states at para.52:-

“52. However, the arguments advanced by the Commissioner in this appeal extend the doctrine beyond these parameters, effectively seeking to extract from ‘curial deference’ a supercharged presumption of validity. It was claimed at one point, for example, that the Court failed to observe due deference to a specialist body by failing to adopt one interpretation of the last paragraph of the conclusions section of the Tribunal’s decision: the Commissioner has sought to contend that ‘curial deference’ means that if there were two possible interpretations of the decision of the Tribunal available, the Court is required to adopt the interpretation that upholds it. That is not a correct statement of the principle. Deference means that in those areas touching on the Tribunal’s 45 expertise, the Court should be slow to interfere with the Tribunal’s reasoning. It does not mean that where the Tribunal’s reasoning is unclear so that there are differing possible interpretations of its decision the Court must simply assume that it was correct in the conclusion it reached. As Charlton J. said in EMI Records v. Data Protection Commissioner at para. 22, “curial deference cannot possibly arise where by statute reasons for a decision are required but none are given.” ‘Curial deference’ is thus properly understood as depending on the Tribunal having provided a properly reasoned decision, not as affording a mechanism for compensating where the decision is not so reasoned. This is evident from the judgment of Hamilton CJ in Henry Denny itself:

“… it should be recognised that tribunals which have been given statutory tasks to perform and exercise their functions, as is now usually the case, with a high degree of expertise and provide coherent and balanced judgments on the evidence and arguments heard by them it should not be necessary for the courts to review their decisions by way of appeal or judicial review” (at para. 38 (emphasis added)).”

83. In the context of a Tribunal considering evidence from experts the decision of the Supreme Court in Donegal Investment Group plc v. Danbywiske & Ors, Supreme Court, 27 February 2017 is helpful. There, Clarke J. (as he then was) explains why it will usually be easier for a court reviewing an assessment of expert evidence at a first instance stage to assess whether the fact finder has properly explained by reasons why the evidence of one expert or another has been preferred. Clarke J. states at para.s 5.5 to 5.7:-

5.5 However, as Charleton J. also pointed out in Elliott, an important part in the assessment of any evidence is the application by the trial judge of logic and common sense to the testimony heard. That approach is particularly relevant in the context of expert evidence. Where experts differ the position adopted by the other side will be put to each of the experts in cross-examination. Their reasons for maintaining their view can be examined in some detail. The trial judge can, therefore, assess whether the reasons give by one expert or the other stand up better to scrutiny. 46 5.6 While it is true, therefore, that the assessment of all evidence, whether expert or factual, requires both the application of logic and common sense, on the one hand, and an assessment of the reliability or credibility of the witness gleaned from having been in the courtroom, on the other, it may be fair to say that it is likely that a decision based on expert evidence will be significantly more amenable to analysis on the basis of the logic of the positions adopted by the competing witnesses and the assessment of the trial judge of their evidence on that basis.

5.7 Precisely because a decision to prefer the evidence of one expert over another is likely to be influenced, to a much greater extent than might be the case in respect of factual evidence, by the rationale put forward by the competing witnesses, there may be somewhat greater scope for an appellate court to assess whether the reasons given by a trial judge for preferring one expert over another can stand up to scrutiny. That being said it must remain the case that an appellate court should show significant deference to the views of a trial judge on the question of findings based on expert evidence because the trial judge will have had the opportunity to see the competing views challenged and scrutinised at the hearing.”

84. In this case, both experts had given reasons for their opinions and it was an error of law not to give a reasoned analysis for why the Taxpayers’ expert’s opinion was being discounted. While the TAC states in para. 55 that the Revenue’s expert “was unwilling to agree that the transactions of a type undertaken by the Appellants was hedging by virtue of his analysis of the financial models upon which the returns or losses were calculated” this reason only serves to seek to explain why the TAC concludes that the Revenue’s expert would not accept that the transactions could be seen as hedging. There is no outline of reasons why the Taxpayers’ expert evidence is being rejected, nor is there engagement with the reasons and arguments he provided.

85. Applying the principles outlined above in Stanberry and Donegal Investment Group I am satisfied that this absence of engagement with the apparent decision to prefer one expert over the other is an error of law. Of course this conclusion is premised on the 47 assumption that such an exercise occurred. The underlying reality is that the evidence actually shows that on this point the Revenue’s expert agreed with the Taxpayers’ expert. Consequently, a lawful conclusion would have required the TAC to set out reasons as to why he was disagreeing with the opinion of both sides experts on this point. For clarity, this Court is not taking the view that the TAC could not have disagreed with both experts on this question of hedging, rather, it is the conclusion of this Court that, applying the relevant principles in Mara v Hummingbird, Stanberry and Donegal Investment Group that the conclusions actually reached by the TAC amount to errors of law for the reasons stated above.

(iv) Fundamental Errors of Law in the Conclusions of the TAC 86. I am satisfied that these errors have a domino effect on and consequently legally compromise the TAC’s conclusion in para. 116 of the Determination that the transactions had no commercial motive other than the deemed tax advantage derived. In reality, the Revenue expert’s concession removed the sole evidential basis put forward for the TAC’s conclusions on this point. Accordingly, these errors are material to the outcome of the Determination. At para. 116 the TAC states:-

116. The Commissioner is satisfied that the purpose of the Appellants entering into the transactions was to obtain a gain on the disposal of the GFCs and a loss on the disposal of the FECDs as the Commissioner was unable to identify any commercial motive for the investment apart from the deemed tax advantage derived. (Underlined for emphasis).

87. This finding amounts to an error of law as the only reason given by the TAC for this conclusion is that the TAC “was unable to identify any commercial motive for the investment”. This reasoning is in error as it fails to take account of the evidence of the experts that these transactions could be seen as hedging each other. In other words this reasoning cannot be sustained because it is based on the erroneous approach taken to the experts’ evidence above and in respect of which the TAC makes a conclusion in error in para. 55 of the Determination.

48 88. In addition, this conclusion is flawed because the TAC (and the Revenue) have conflated the issue of whether there was a commercial purpose to the transactions with the separate issue of whether the two sets of transactions (the Gilts and FECDs) had to be taken together or could be viewed separately. It fails to take account of the fact that even if the transactions were only ever likely to be taken out together, that did not necessarily mean that they did not have a commercial purpose according to the evidence of both experts.

89. This error in turn further contaminates the conclusion reached in para. 117 of the Determination which reads:-

117. Therefore, the purchase and disposal of the GFCs and FECDs by the Appellants could have had no commercial purpose other than to crystallise an artificial tax loss. As such, in structuring the transactions in an attempt to procure the exemption contained in section 607 TCA 1997, the Commissioner is satisfied that the Appellants procured a significant “tax advantage” and that the purchase and sale of the transactions “was …. arranged primarily …. to give rise to a tax advantage” thereby constituting a “tax avoidance transaction”. (Underlined for emphasis).

90. As para 117 makes clear, the finding being expressed therein arises from the finding just made in para. 116. In failing to properly assess the evidence of the experts, the TAC concludes, without addressing the expert evidence properly, that the transactions constitute tax avoidance transactions, presumably within section 811(2).

(v) Error in relation to the burden in respect of section 811(3)(a)(ii), the Relief Exclusion 91. Following on from these conclusions in para.s 116 and 117, the TAC then finds that there is a positive obligation on the Taxpayers to demonstrate that there was no misuse or abuse of the section 31 of the TCA, and more specifically, that there was an obligation on the Taxpayers to set out the “purpose” of section 31 TCA 1997. This is important as it goes to the legal task of correctly applying the Relief Exclusion which in turn involves considering the correct interpretation of the statutory provision that provides for the ‘relief’. As the court of Appeal in Hanrahan explain, that exercise 49 “requires an objective assessment of what the law is and cannot be swayed by a consideration of who bears the burden”. It is appropriate to note that the Determination of the TAC was issued prior to the decision of the court of Appeal in Hanrahan. At para. 118 the TAC states:-

118. Contrary to the positive obligation to demonstrate that there was no “misuse …. or an abuse of” section 31 TCA 1997 “having regard to the purposes for which it was provided”, the Appellants failed to satisfy this requirement. Therefore, it is not clear how the Appellants can succeed when there was no articulation of the purpose of section 31 TCA 1997. (Underlined for emphasis).

92. I am satisfied that this is important error of law, that also subsequently impacts on the actual analysis done by the TAC of the provisions that provided the relief in this case, namely sections 31 and 607 TCA 1997. The Court of Appeal decision in Hanrahan sets out a very helpful discussion on this issue which arose in that case and had been handled in the same way by the TAC in that case. Butler J. and Donnelly J state at para.s 96-98:-

“Burden of Proof 96. An issue raised in the appeal by Revenue is that of the “burden of proof”. Revenue submitted that, as a matter of law, the burden of proving the transaction came within s. 811(3)(a)(ii) rested with the taxpayer (per McKechnie J. in O’Flynn Construction). They referred to the finding of the Appeal Commissioner that the taxpayer had failed to discharge the positive obligation to prove that the Transaction did not result in a misuse of the provision or an abuse of the provision having regard to the purposes for which it was provided.

97. Where the onus of proof lies can be highly relevant in those cases in which evidential matters are at stake. It is perhaps easier to use an example that might arise under a different subclause of s. 811(3) to demonstrate the importance of this issue. For example, if there was an issue as to whether a particular transaction “was undertaken or arranged by a person with a view, directly or indirectly, to the realisation of profits in the course of the business activities of

50 a business carried on by the person” (pursuant to s. 811(3)(i)(I)), the placing of the burden of proof on the taxpayer would be of particular significance.

98. In the present case however, the issue is not one of ascertaining the facts; the facts themselves are as found in the case stated. The issue here is one of law; whether a transaction, which has been found to have no commercial or business purpose, is not, by virtue of s. 811(3)(ii) TCA, a tax avoidant transaction. It is difficult to see how any particular burden, other than one of seeking to persuade by way of argument that as a matter of law the transaction is not one that falls foul of s. 811 TCA, could arise in such a situation. Ultimately when an Appeal Commissioner is asked to apply the law to the agreed facts, the Appeal Commissioner’s correct application of the law requires an objective assessment of what the law is and cannot be swayed by a consideration of who bears the burden. If the interpretation of the law is at issue, the Appeal Commissioner must apply any judicial precedent interpreting that provision and in the absence of precedent, apply the appropriate canons of construction, when seeking to achieve the correct interpretation. The High Court cannot be bound by an interpretation of law by an administrative body. It is the role of the courts to apply the law and it is therefore difficult to see how reference to this particular burden goes beyond the usual burden that a moving party would bear before a court when seeking to persuade a court of the correctness of their position at law.” (Underlined for emphasis).

93. As indicated above, the Court of Appeal makes clear that in a scenario where an Appeal Commissioner is of the view that a transaction or series of transactions have delivered a tax advantage to a taxpayer and have no commercial or business purpose then “[i]t is difficult to see how any particular burden, other than one of seeking to persuade by way of argument that as a matter of law the transaction is not one that falls foul of s. 811 TCA, could arise in such a situation. Ultimately when an Appeal Commissioner is asked to apply the law to the agreed facts, the Appeal Commissioner’s correct application of the law requires an objective assessment of what the law is and cannot be swayed by a consideration of who bears the burden”.

51 94. By the time para. 118 of the Determination is reached, the TAC had reached the conclusion that the transactions in substance had procured a tax advantage and had no commercial or business purpose. Accordingly, even assuming I am wrong in the findings above about the errors in the reasoning set out in para.s 116 and 117 of the Determination, it was an error of law for the TAC to conclude in para 118 that the Taxpayers had failed to satisfy a “positive obligation” that there was no misuse or abuse of section 31 and that “[t]herefore, it is not clear how the Appellants can succeed when there was no articulation of the purpose of section 31 TCA 1997”.

95. In fact the correct approach, if the TAC had lawfully reached the conclusion that there was no commercial or business purpose to the transactions, would have been to consider, having applied the principles of statutory interpretation, the purposes of both sections 607 and 31 and secondly as to whether the transactions in question amounted to an abuse or misuse of those provisions having regard to their purpose. Instead, the TAC concludes at the end of para. 118 that “[t]herefore, it is not clear how the Appellants can succeed when there was no articulation of the purpose of section 31 TCA 1997”. That conclusion, which is based on the error as to the burden, accordingly, represents an error of law. This error of law is independent of the errors referred to above in respect of the conclusions and reasoning contained in para.s 116 and 117.

(vi) Were the transactions a “misuse” or “abuse” of sections 607 and 31? 96. Consideration of this issue involves looking at the meaning of those words in the context of section 811 and also then looking at sections 607 and 31 and having particular regard to their purpose.

97. Extensive consideration has been given to the meaning of section 811 in the Supreme Court decision in O’Flynn (which considered section 811’s predecessor, section 86 of the Finance Act, 1989) and by the Court of Appeal in Hanrahan.

98. In O’Flynn O'Donnell J, (as he then was) explains that section 86 has its origin as legislation passed in the aftermath of the Supreme Court decision in McGrath v. McDermott [1988] I.R. 258 where the court had refused to follow the approach adopted in England and Wales by the House of Lords in Ramsey and Furniss; see para 54 where O’Donnell J. states:- 52 “It was common case on this appeal that it was significant that s. 86 was introduced in the Act of 1989, a provision which followed shortly after the important decision of this court in McGrath v. McDermott[1988] I.R. 258. It is agreed that the purpose of the section was to address the consequences of that decision, and indeed reverse it. In that case, both the High Court and the Supreme Court had refused to follow a recent development in the two famous, if controversial, cases then relatively recently decided by the United Kingdom House of Lords: W.T. Ramsay v. Inland Revenue Commissioners[1982] A.C. 300 and Furniss v. Dawson[1984] A.C. 474. Instead, the courts of this jurisdiction had restated the law as set out in Inland Revenue Commissioners v. Westminster (Duke)[1936] A.C. 1.”

99. O’Donnell J. then points out at para. 64 of O’Flynn that “[i]t is central to the question of interpretation which arises in this case that s. 86 was enacted as an immediate response to the decision in McGrath v. McDermott and its implicit invitation, to enact a comprehensive anti-avoidance provision.”

100. O’Donnell J. then turns to consider the equivalent provision providing for the Relief Exclusion contained in section 86(3)(b), the equivalent essentially of section 811(3)(a)(ii) of TCA 1997. In that regard he states at para. 69 as follows:-

“In my view the background to s. 86, together with its internal structure, is important in considering the true meaning and application of s. 86(3)(b). That subsection cannot be treated as a stand alone provision on reliefs and benefits. It is a component part of the overall provision. Section 86 as a whole requires a consideration of whether or not the Revenue Commissioners should form an opinion that a transaction is a tax avoidance transaction, and sets out those matters to which the Commissioners should have regard in forming that opinion. Section 86(2) seeks to identify those matters which are to be treated as tax avoidance transactions. The matter could perhaps have been left at that, but s. 86(3) seeks to identify positively matters which are not tax avoidance transactions. In considering para. (b) of subs. (3), the pattern set by s. 86(2) is instructive. The starting point for the application of s. 86(2) is that the 53 transaction would not come within the taxing provision, were it not for the provisions of s. 86(2) and the disallowance and re-characterisation permitted pursuant to that section, s. 86(3)(b) is only capable of applying to transactions which are otherwise within the relief provision at least as literally construed. There must be use, before there can be said to be misuse or abuse. Here again, therefore, it is clear that the approach enunciated in Inland Revenue Commissioners v. Westminster (Duke)[1936] A.C. 1 has been modified significantly. Prior to the enactment of s. 86(3)(b), if a transaction came within the specific words granting relief then that was the end of the inquiry. However, it is now necessary to consider whether the transaction constitutes a misuse or abuse of that relief having regard to the purposes for which it was provided.”

101. The judgment of O’Donnell J. in O’Flynn explains that section 86 allows the court and the Revenue to look to substance as well as form and to consider the results and purpose of transactions and the means used to obtain those results. I am satisfied that the TAC was entitled therefore to look at the overall effect of the GFC and FECD transactions on a combined basis and to view them collectively. However, that is not the end of the matter. Whether or not there is an abuse or misuse of the relief provisions still requires those provisions to be interpretated and for regard to be had specifically to their purpose.

102. In relation to section 86(3)(b) O’Donnell J. indicates that this requires a purposive inquiry. In essence, relief is not to be obtained in a way that although literally within the ambit of the statutory provision is contrary to the purpose of that provision. On the facts in O’Flynn the conclusion reached was that the transactions which essentially transferred export sales relief (ESR) to a company that was not otherwise eligible for ESR constituted an abuse of the ESR provisions.

103. Turning then to Hanrahan, the Court of Appeal was considering section 811 in the context of a Taxpayer that had used the “deeming” provisions contained in section 549 TCA 1997 to artificially create a loss that was not actually incurred for the purposes of using that loss to offset against chargeable gains. At para. 70 of their joint judgment, Ms. Justice Donnelly and Ms. Justice Butler state as follows:-

54 “The starting point is a consideration of the terms of s. 811(3)(a)(ii) TCA. Its predecessor, s. 86 of the Finance Act, 1989, was considered by the Supreme Court in O'Flynn Construction. Both the taxpayer and Revenue rely extensively on that judgment in support of their respective positions. It is Revenue's position that the trial judge erred in not finding that there was a misuse or abuse of the relieving provisions of s. 31 having regard to the purposes for which that provision was intended. Section 31 provides that capital gains tax shall be charged on the total amount of chargeable gains after deducting any allowable losses. In interpreting “allowable losses” Revenue submit the trial judge ought to have considered the sections which “feed into” the provision of those allowable losses. In particular, the taxpayer should have only been allowed his actual loss rather than the artificial loss generated through the misuse or abuse of s. 549. The taxpayer submits that what is at issue is an interpretation of the purpose for which s. 31 was enacted. In the taxpayer's view, the purpose of s. 31 is a more neutral one; it is to provide for all losses allowable under the tax code to be deducted from the chargeable gains.”

104. The judgment in Hanrahan then examines both section 811(3)(a)(ii) and section 31 TCA, which provides for the deduction of “allowable losses”, in detail in the context of the facts in that case. There are many extremely useful and relevant extracts, in particular the following:-

105 The Supreme Court in O'Flynn Construction gave a definitive interpretation to the predecessor of s. 811 TCA, but that is only the start of the present examination.

106 It must be recalled that there is a specific statutory requirement in s. 811 demanding that Revenue look at the misuse or the abuse of a provision having regard to its purpose. It is a statutory imperative to consider the purpose of the relevant provisions when required to do so under s. 811 TCA. … 117 Under s. 28(1) TCA, capital gains tax shall be charged in accordance with the Acts in respect of capital gains, that is, in respect of chargeable

55 gains computed in accordance with those Acts and accruing to a person on the disposal of assets. Section 31 provides that CGT is charged on the total amount of chargeable gains after deducting “any allowable losses accruing to that person”. There is no definition of the word “losses” in the TCA. Revenue says that “allowable” is defined elsewhere. It is Revenue's contention that the word “losses” bears a literal and ordinary meaning and is indicative of something that a taxpayer ceases to have which they had previously. Therefore, it is a tangible financial deprivation.

… 124. At this point it is necessary to return to the principles of statutory interpretation. What s. 811 permits a court to consider is, inter alia, the misuse or abuse of a provision having regard to its purpose. The purpose of the provision must be identified. The purpose of a provision is to be understood by looking at the words in their context having regard to the legal background against which it was enacted. While we accept that the background is the decision in McGrath v McDermott and that s. 86 (and s. 811) reversed that decision, that reversal was in the sense that there is now general anti-avoidance legislation which permits the form, substance and outcome of the transaction to be addressed having regard to purpose. It was not a reversal of every aspect of McGrath v McDermott.

125 McGrath v McDermott concerned the original CGT provisions, which are largely reproduced in the provisions at issue in these proceedings. Section 811 did not purport to amend those provisions; nothing in the wording of the section could lead to that conclusion. Rather it is in how they might be applied (or misused/abused) that is the issue.

126. The taxpayer points to what was said in McGrath v McDermott about s. 12 and s. 33(5) of the Capital Gains Tax Act, 1975 (now s. 546(2) and s. 549(6) and (7) TCA respectively) and submits that this still 56 applies. Carroll J. in the High Court in their (sic) said that the s. 12(1) “requires that capital losses are to be computed in the same way as capital gains. Therefore just as Section 33(5) would be applied in computing a capital gain regardless of whether there was a corresponding actual gain, so also the section must be applied in computing a capital loss regardless of whether there is a corresponding actual loss.” Both Supreme Court judgments of Finlay C.J. and McCarthy J. record that Revenue argued for reading into the relevant statutory provisions a rule or principle which rendered them inoperable unless the taxpayer established a real loss (ultimately conceding that it would also have to apply to the computation of a gain under the section). Finlay C.J. went on to say that what was being urged was the insertion of a new subclause or sub-provision into each one of those subsections providing that a condition precedent to the computing of an allowable loss pursuant to the provisions of s. 33(5) is the proof by the taxpayer of an actual loss, presumably at least coextensive with the artificial loss to be computed in accordance with the sub-section.

127. In O'Flynn Construction, when O'Donnell J. held that the effect of s. 811 was to reverse McGrath v McDermott, he was referring to the entitlement of Revenue to look at the substance of the transaction rather than a reversal of any specific legislative provision. If there is any doubt about that, and we do not believe there is, O'Donnell J. clarified that in his judgment in Bookfinders (para 40). In those circumstances, we do not accept that s. 811 can be said to have altered the purpose of sections 31, 456 and 459 TCA. Instead, what is altered by s. 811 is the entitlement of Revenue to look at the substance, form and outcome of a transaction when considering if such a transaction is a tax avoidance transaction and that Revenue must have regard to a misuse or abuse of any relieving provision.

128. We turn once more to the wording of s. 811(3)(a)(ii) TCA. This sub- section specifically provides for what is not to be regarded as a tax avoidance transaction. It is the provision which requires there to be a 57 misuse or abuse of a relieving or abatement provision having regard to the purpose for which it was enacted. That requires a specific consideration of the purpose of each legislative provision. … … 140. How then to discern the purpose of s. 31? The purpose of the section must come from the plain and ordinary meaning of the words as they are seen in context within the taxation provisions. Section 31 however does not operate in isolation from the other provisions relevant to CGT and which address what losses are allowable and what are not allowed. Section 31 comes within Part 2 of the TCA dealing with The Charge to Tax, and Chapter 4 of that Part which deals specifically with Capital Gains Tax. Section 28 provides for the taxation of capital gains and the rate of charge. Section 31 provides that the tax shall be charged on the total amount of chargeable gains in the year of assessment after deducting any allowable losses accruing to that person in the year of assessment.

141. Section 31 refers to allowable losses. The meaning of “allowable” or “losses” or “allowable losses” are not defined in s. 31. There are, however, provisions that define what losses are allowable. These matters are dealt with later in the TCA at Part 19, Chapters 1 and 2. Those section (sic) are the principal provisions relating to CGT and to the computation inter alia of allowable losses. We consider that s. 546 distinguishes between “loss” and “allowable loss”; not all “loss” is an “allowable loss”. We accept that in so far as may appear from the words used, s. 546 is directing attention towards what may be said to be “real” losses rather than towards an artificially created loss; for example, subs. 5 prevents relief being given more than once in respect of any loss or part of a loss. We have already discussed the purpose of s. 549 as being to prevent tax avoidance by preventing connected persons manipulating the CGT provisions by the disposal of assets at an undervalue.

58 142. .. . We are satisfied that s. 556 as enacted certainly supported the view that it was real losses/gains which were at issue. The cesser of the effect of that section from 2003 onwards does not affect the interpretation of the meaning of “allowable losses” within s. 31. More definitively it can be stated that it does not support an interpretation under which the deduction of artificially created losses would be consistent with the purpose of s. 31.

144. We have no doubt that the purpose of s. 31 must be viewed in the context of the overall provisions of the Act which includes general provisions providing for the computing of chargeable gains and allowable losses. That is a standard canon of statutory interpretation. It is not appropriate, therefore, to say that a court is limited only to the words within the section when ascertaining its purpose. The section exists within the TCA and its provisions must be interpreted accordingly. The other provisions in TCA provide for losses which are allowable. It also must be viewed in the context of the deeming provisions which are clearly purposed to prevent manipulation of the CGT provisions by overvaluing losses or undervaluing gains. In their ordinary meaning, the words “loss” or “losses” mean having something less, i.e., something tangibly less. Any understanding of loss within s. 31 would have as a starting point that it was to relieve financial loss against financial gain. Nothing in what has been submitted to us demonstrates that “allowable losses” were to be anything other than tangible losses. It is in that sense that losses which are “real” or “monetary” are at the heart of s. 31 TCA. Section 549 identified what those gains and losses were in the context of disposal/acquisition of assets between connected persons.

147. … Actual or real financial losses are to be set against actual or real financial gains in circumstances where provision is made intending that connected persons are not permitted to manipulate the CGT provisions so as to over value losses and undervalue gains. We say directly because

59 the purpose of s. 31 cannot, contrary to the trial judge's finding, be assessed without reference to the interlocking provisions of s. 549 TCA.

148. In those circumstances, there was a clear misuse and abuse of the provisions of s. 31 by this Transaction. …”

105. A number of interesting observations can be made. Firstly, as the Court of Appeal explains, section 811(3)(a)(ii) requires the Revenue to examine whether the transactions involve a misuse or abuse of the statutory provision that provides the relief that was claimed, having regard to its purpose. This therefore permits an inquiry into the substance and outcome of the transactions.

106. In Hanrahan it was important that the term “allowable losses” in section 31 was understood in light of the wider CGT framework, including sections 546 and 549, which were key in that case (section 549 does not arise for consideration in this case though). By virtue of those deeming provisions the taxpayer had created an artificial loss and the Court concluded that those specific arrangements constituted a misuse or abuse of the relieving provisions and therefore fell with section 811 as tax avoidance.

107. Applying the principles of statutory interpretation discussed above requires that section 31 be considered in its statutory context. As the Court of Appeal stated at para. 144 “[w]e have no doubt that the purpose of s. 31 must be viewed in the context of the overall provisions of the Act which includes general provisions providing for the computing of chargeable gains and allowable losses. That is a standard canon of statutory interpretation”. Section 31 (which provides for the deduction of “allowable losses”) is set out above. The statutory context involves considering sections 545 and 546. These provide as follows:-

545.—(1) Where under the Capital Gains Tax Acts an asset is not a chargeable asset, no chargeable gain shall accrue on its disposal.

(2) The amount of the gain accruing on the disposal of an asset shall be computed in accordance with this Chapter, and subject to the other provisions of the Capital Gains Tax Acts. 60 (3) Except where otherwise expressly provided by the Capital Gains Tax Acts, every gain shall be a chargeable gain.

(Underlined for emphasis)

546.—(1) Where under the Capital Gains Tax Acts an asset is not a chargeable asset, no allowable loss shall accrue on its disposal.

(2) Except where otherwise expressly provided, the amount of a loss accruing on a disposal of an asset shall be computed in the same way as the amount of a gain accruing on a disposal is computed.

(3) Except where otherwise expressly provided, the provisions of the Capital Gains Tax Acts which distinguish gains which are chargeable gains from those which are not, or which make part of a gain a chargeable gain and part not, shall apply also to distinguish losses which are allowable losses from those which are not, and to make part of a loss an allowable loss and part not, and references in the Capital Gains Tax Acts to an allowable loss shall be construed accordingly. (Underlined for emphasis)

These provisions demonstrate the overall CGT framework in TCA 1997 considers “allowable losses” to be the mirror of “chargeable gains”.

108. Next, while the approach contained in section 811 amounts to a departure from the tax position that applied in McGrath v McDermott, the Court of Appeal explain in Hanrahan that section 811 did not amend the underlying CGT provisions that were considered in McGrath. As the Court of Appeal says at para 125 in Hanrahan:-

“McGrath v McDermott concerned the original CGT provisions, which are largely reproduced in the provisions at issue in these proceedings. Section 811 did not purport to amend those provisions; nothing in the wording of the section could lead to that conclusion.” 61 Importantly, as Carroll J. indicated in the High Court in McGrath “capital losses are to be computed in the same way as capital gains”.

109. When the TAC Determination is considered in the round (perhaps due to the error as to the burden being on the Taxpayer, which only became explicitly clear following the Court of Appeal decision in Hanrahan which post-dated the TAC Determination), there is an absence of engagement in this aspect of the purpose of section 31 in the Determination. The TAC fails to have regard for the need to assess the purpose of section 31 by reference to how it links the concept of “allowable losses” to “chargeable gains”. In context, it is clear that the purpose of section 31 is to provide that a deduction can be made for an “allowable loss” if a gain on the same transaction would be chargeable.

110. Specifically, in this case, the FECD transactions had a 10% prospect of making a profit; this percentage likelihood is admitted to in the Revenue’s submissions. Had the Euro Stoxx 50 Index moved in a manner which the evidence suggested it had a 10% chance of doing, then the FECD transactions would have produced a massive profit and it is difficult to see how this would not have produced a chargeable gain. If the “purpose” of section 31 is to be understood coherently then in general if the same transaction had turned out badly and made a loss, then that loss is “allowable”, otherwise this provision cannot work coherently. For example, an investor would be faced with the prospect of advice to the effect that a transaction will probably produce a loss (which will be a tax advantage) and if it does, it may be disallowed as tax avoidance. On the other hand if it produces a gain (and it has a plausible prospect of so doing) that gain will be chargeable. A lack of duality is not consistent with the meaning of the words in the section when viewed in their statutory context as part of the regime for assessing chargeable gains and allowable losses that was in force at the time. The Court of Appeal decision in Hanrahan makes clear that section 811 did not overturn the analysis of the meaning of the CGT provisions in McGrath. In McGrath it is worth recalling Finlay C.J.’s observation as to this duality at page 275:-

“It is, however, contended on behalf of the Revenue that this Court should introduce into the application of these statutory provisions a rule or principle 62 which renders them inoperative unless the taxpayer can establish a real loss. It is with some hesitation conceded on their behalf that it is difficult to avoid the logical conclusion that a similar precondition would have to apply to the computation of a gain under the subsection.” (Underlined for emphasis).

111. The purpose of this analysis is not to foreclose on what the actual conclusion should have been of an application of these provisions to the facts. The question of “misuse” and “abuse” (not in truth too separate concepts, each rather illuminates the other, see O’Donnell J. in O’Flynn) still has to be evaluated in the context of the correct application of section 811(2) and (3). However, an essential part of the statutory exercise is to consider the question by “having regard to the purposes” of the relief provision. I am not satisfied that this was done fully and applying the principles of statutory interpretation discussed above; albeit that this is understandable in the context where the comprehensive Court of Appeal decision in Hanrahan had not, at the time, issued. The Court’s observations in this regard are confined to addressing the issues around the legal approach of the TAC, not towards indicating a contrary opinion or view on the question of whether these transactions amounted to tax avoidance.

112. There is a second legal difficulty that I believe arises in this case. As the principles in relation to statutory interpretation discussed above make clear, section 811(3)(a)(ii) has to be interpretated in its context. Within section 811, it is clear that section 811(3)(a)(ii) is designed to provide for a mandatory (“… shall not …”) exclusion of a transaction or set of transactions that are otherwise caught by section 811(2). That much emerges clearly from the wording of section 811(3)(a)(ii):-

811(3) (a) Without prejudice to the generality of subsection (2), in forming an opinion in accordance with that subsection and subsection (4) as to whether or not a transaction is a tax avoidance transaction, the Revenue Commissioners shall not regard the transaction as being a tax avoidance transaction if they are satisfied that -

[The Relief Exclusion] 63 (ii) the transaction was undertaken or arranged for the purpose of obtaining the benefit of any relief, allowance or other abatement provided by any provision of the Acts and that the transaction would not result directly or indirectly in a misuse of the provision or an abuse of the provision having regard to the purposes for which it was provided.

113. However, as section 811(2) can only apply to transactions that in the opinion of the Revenue were “not undertaken or arranged primarily for purposes other than to give rise to a rax advantage” it would be illogical if the exclusion provided for in section 811(3)(a)(ii) would be lost if entering into a transaction with the primary purpose of gaining a tax advantage is to be considered an abuse or a misuse of a provision that provides for relief or an allowance. For example, let us assume a taxpayer entered into a transaction with the primary purpose of triggering a capital loss that would be allowable as an “allowable loss” for the purposes of gaining a tax advantage. If that transaction was considered for that reason to be a misuse or abuse of section 31 then in effect the Relief Exclusion would be stripped of practical meaning, as the Relief Exclusion is only relevant to exclude a transaction that would otherwise be likely to be deemed as a tax avoidance transaction under section 811(2) which, by definition requires it to, in effect, have been entered into for the primary purpose of gaining a tax advantage. Put another way, if a transaction is an abuse of the relief provision simply because the transaction is designed to produce a tax advantage then the Relief Exclusion loses practical purpose as an exclusion to the general provision in section 811(2) as it would never come into operation. Something more must be required for the transaction to amount to an abuse or misuse of the relief provision. If the position were otherwise, the Revenue could assess a transaction as a tax avoidance transaction based on its primary purpose (namely to gain a tax advantage) and then deny a taxpayer the potential benefit of the Relief Exclusion because the very same purpose would mean the relief provision was being abused. The taxpayer would be trapped in a circular argument which they would always lose.

64 114. I am not satisfied that these implications, which flow from the interpretation of the words “misuse” and “abuse” in the context of the provisions of section 811 as a whole have been taken into account or adverted to.

115. Aside from section 31, the Determination contains no detailed analysis of the purpose of section 607 at all. Again, this may be a result of the approach adverted to above in relation to the TAC’s finding that there was a burden on the Taxpayers. However, for whatever reason there is therefore an error of law in that respect as such an analysis is required by section 811(3)(a)(ii) to determine whether the relief from tax provided by section 607 has been abused.

116. Aside from the matter of pure law referred to above, I am also satisfied that the facts as found by the TAC in this case are different from the position in both O’Flynn and Hanrahan. In O’Flynn there was on the facts a clear abuse of the ESR provisions. The company in question did not itself qualify for the relief. In Hanrahan the taxpayer created a loss that was artificial by abusing the deeming provisions related to transactions between connected persons.

117. In this case, the findings of fact set out earlier in the Determination demonstrate that real gilts had been bought and then sold and real foreign currency CFDs had been entered into and transacted creating actual losses. Even if the primary purpose of these transactions, when looked at collectively, was to gain a “tax advantage” then a further analysis involving a consideration of the purpose of sections 31 and 607 was required to assess whether, by reference to the purpose of those provisions, these transactions constituted an abuse or misuse of those provisions.

118. The TAC appears to have concluded that if the primary purpose of the transactions were to avoid tax that this in itself meant that the transactions could not avail of the Relief Exclusion. This is a misreading of section 811(3)(a)(ii) for the reasons described above.

119. In addition, the TAC’s conclusion that the losses were not “actual monetary losses” (per para 119 of the Determination) is not sustainable and involved an incorrect interpretation and application of the provisions. The actual material facts as found by the TAC showed actual transactions involving actual gains and losses. Accordingly, the 65 real issue was around the interpretation of the purpose of the relief provisions and the meaning and application of the words “misuse” and “abuse” in section 811(3)(a)(ii) having regard to the purpose of those provisions.

120. In addition, the reasoning of the TAC as expressed in para 121 of the Determination that the transactions “could not have been envisaged by the Oireachtas in enacting … section 31” is not a correct approach to statutory interpretation. This articulation of an exercise in statutory interpretation is legally in error as it involves replacing a proper search for the meaning of the relevant legislation according to the well-established principles governing the exercise of statutory interpretation with simply the TAC’s own view of what the provisions should mean in this particular case by means of imagining whether the Oireachtas could have envisaged these types of transactions. This approach is not supported by the established principles of statutory interpretation and it is flawed as it permits a quasi-judicial decision maker such as the TAC to apply their own subjective view to the problem.

121. Accordingly, the TAC’s overall approach to the interpretation of the relevant legislative provisions was therefore deficient. The caselaw discussed above on statutory interpretation requires the text of the provisions to be examined in their context and within the structure and scheme of the legislation. Whether by virtue of the error in considering that there was a burden on the Taxpayers, or otherwise, there has been no proper consideration by the TAC of the “purpose” of the relevant provisions providing the reliefs and allowances claimed. That is an essential prerequisite to considering the question as to whether the relief provisions have been misused or abused. Instead, the TAC has applied a subjective view that the transactions here “could not have been envisaged by the Oireachtas”. That approach is an error of law and a departure from the requirement to focus on the words in the legislation in context as discussed above. Consequently, the conclusion by the TAC that the transactions were a “misuse” or “abuse” of sections 607 and 31 has been reached in error.

(vii) Reliance on the subsequent amendment by way of the introduction of section 546A 122. The principles in relation to this issue are conveniently summarised by O’Donnell J. (as he then was) in Bookfinders at para. 85 where he states:-

66 “I agree also that the decision in Cronin, which considered that subsequent amendments could not be used as a guide to the construction of the prior statutory provision, is not applicable in this case, and is somewhat different. In that case, Griffin J. rejected the argument that the amendment was indicative of a view on the part of the Oireachtas that the original provision bore the interpretation which the taxpayer was asserting. As Griffin J. pointed out, such amendments may be made for a variety of reasons and, in any event, the question was not what view the Oireachtas or, more plausibly, those promoting the amendment, understood the previous provision to mean, but what the Court considered it to mean.”

123. This has been further reflected in the decision of Holland J. in Shadowmill Ltd. v An Bord Pleanála [2023] IEHC 157 where he states at para. 300:-

“300. In Droog the Supreme Court noted, without demur, that Laffoy J in the High Court in that case had applied its decision in Cronin, to the effect that a subsequent amendment is at best neutral as to interpretation of a statute in its pre-amendment form. It cannot be used to construe the statute as it was before the amendment. It is for the courts to say what the true construction of a statute is, and that construction cannot be influenced by what the Oireachtas may subsequently have believed it to be. Barr J in Cassidy likewise applied the view taken by Laffoy J in Droog. Similar observations were authoritatively made in Bookfinders. However O'Donnell J in Bookfinders observed that “the pre- existing statutory provision may sometimes provide helpful guidance as to the interpretation of a subsequent amending provision, since it can often indicate the state of the law which it is intended to alter and suggest a rationale for the amendment, which may in turn assist in its interpretation.” That logic implies that the pre-existing statutory provision may also provide helpful guidance as to the interpretation of a subsequent provision, not amending it, but repeating it — in other words, the Barras Principle. As applied to this case it implies that the interpretation given to S.26 of the 1963 Act at very least helps in interpreting S.34(1)PDA 2000.”

67 124. While the Taxpayer submits that these statements of principle are obiter, even if they are arguably obiter, they have been reiterated too frequently at Supreme Court level, not to be adopted by this Court. In any event I agree with them. The question of what a particular legislative provision means, is a question ultimately for the courts. Even if a subsequent legislative amendment could be inferred to have implications for the meaning of a pre-existing provision, that is not in itself a reliable guide as to what that pre-existing provision actually means when compared to following the approach set down in the jurisprudence for interpretating the provision.

125. A small example can suffice. On the 31 July 2023 the Oireachtas amended section 40 of the Civil Liability and Courts Act, 2004 by the inclusion of subsection 7A into section 40. This amendment was introduced by means of section 56 of the Courts and Civil Law (Miscellaneous Provisions) Act 2023. The new subsection 7A provided for a precise scope and effect that was to apply to the existing subsections (6) and (7) of section 40. However, as it happened, shortly before this statutory amendment was made, the Court of Appeal on the 5 May 2023 in AX v BX [2023] IECA 109 (Collins J. at para. 18) had held that subsections (6) and (7) had precisely this scope and effect anyway on their own terms. What then, a person considering the meaning of subsections (6) and (7) might ask, was the purpose of the amendment and, absent the decision of the Court of Appeal, what implications might a consideration of this subsequent amendment have had for an interpretation of subsections (6) and (7) prior to this amendment? As it happens, there was a logic. The process of putting together the amendment appears to have occurred, naturally, in advance of the Court of Appeal decision in AX and at a time when there was two competing High Court interpretations of the subsections. However, absent a consideration of this jurisprudence, the subsequent amendment by the inclusion of subsection 7A, if given any weight by a judge considering the pre- amendment meaning of subsection (6) and (7), could only have been unhelpful to the actual task of correctly interpretating the meaning of those subsections prior to the amendment.

126. Accordingly, while the Taxpayers’ submissions presented an attractive argument that the subsequent amendment introduced in 2010 demonstrated that a “gap” was being closed, I prefer the arguments of the Revenue on this issue and do not consider it

68 appropriate to consider the amendment introduced in 2010 as part of the analysis required in the case.

(viii) The submission of Revenue that “there was no foreign currency element at all” 127. If the gist of this submission was to suggest that the FECD transactions were in some sense not real, then this submission is not sustainable based on the Material Facts as found by the TAC which were not disputed by the Revenue.

128. According to the facts as found by the TAC “A Foreign Exchange Contract for Difference (“FECD”) was entered into” and the Taxpayers issued a “letter of instruction on 11th December 2007 to Schroders regarding the settlement of the FECD transaction” and Schroders issued “FECD maturity confirmation” and “[t]he results of the transactions entered into by the [Taxpayers] was that [t]hey made a loss on the FECD transactions.”

129. These transactions were real and the Taxpayers were liable for and had to settle, in cash, for the losses that arose. That does not, of course, prevent the transactions from being looked at in the context of the other Gilts transactions. However, that issue is relevant to the other issues discussed above in the context of tax avoidance and the Relief Exclusion, and whether there was abuse or misuse of sections 31 and 607.

130. If the gist of this submission was to suggest that the outcome was not linked to any movement as between foreign currencies then that point is both irrelevant and not in dispute. The agreed facts indicate that “the return on both the GFC and FECD transactions was derived from the movement on the Euro Stoxx 50 index”. From a commercial point of view the transaction was linked to the movements in the Euro Stoxx 50 Index. There is no finding or statement from the TAC that such a linkage is any less commercial or real than linking a transaction to movements in foreign currency or foreign exchange rates.

(ix) The question in the Case Stated around whether the TAC had erred by following authorities from the UK rather than established Irish precedent to the contrary. 131. This was not debated to any extent and nor is it clear that the TAC did follow UK authorities rather than Irish caselaw “to the contrary”. To the extent that the Revenue 69 did seek to refer to UK authorities during submissions, this largely appeared to be illustrative. However, the cases of Schofield and Ramsay for example are quite distinguishable from the factual position in this case. For example in Schofield, the scheme adopted by the taxpayer “guaranteed” to deliver a loss. Similarly in Ramsay, the scheme was also designed to guarantee the outcome, and according to the tax consultant’s letter, had ”no prospect of … making a profit”.

132. Leaving aside the legal questions discussed in relation to earlier issues, the position here was factually different. Revenue accept that the FECD transactions had a 10% prospect of making a profit. While a loss was by far the probable outcome, a 9 to1 chance of a different outcome is not an outcome that is unfeasible or implausible. To adopt an imperfect analogy from sports, for a football team which is 9 to 1 to win would be an upset but not remotely unheard of (see for example in January 2026 alone, Macclesfield in the FA Cup who beat Crystal Palace at odds of 9-1, and Bodo/Glimt (who had a 14% chance to win) in the Champions League who beat Manchester City). Or, in golfing terms – a less comparable analogy admittedly - a player with current odds of 9 to 1 to win the Masters this year would currently be third favourite. Albeit this may simply mean that in golf it cannot usually be said before the tournament begins that any competitor is probably going to win (unlike the examples of Crystal Palace and Manchester City). However this observation may do no more than indicate the differences between a probable outcome, a favourite and an outsider. Either way, the point here is that, on the facts as not disputed, there was a real prospect, albeit not one that was probable, that the FECD transactions would produce a profit, which on the Taxpayer’s approach, would yield an additional chargeable gain. While this cash profit would largely fund the almost matching losses on the Gilts, the overall outcome for the Taxpayer from these transactions when viewed collectively in that scenario would be very disadvantageous for the reasons described earlier, i.e. the gains on the FECDs would be taxable but the losses on the Gilts would not be deductible.

133. Accordingly, the UK authorities indicate that (leaving aside the legal questions that arise in this case, such as around treatment of evidence, reasoning and the interpretation of legislation) the schemes in those case were different in at least that one fundamental respect.

70 (x) The issue as to whether the fees should have been deducted 130. This issue was addressed only in each side’s written submissions, as described above. The TAC’s finding that there was an absence of evidence to connect these fees to the transactions underpins the outcome of the TAC.

131. The starting point is section 552 TCA 1997, which identifies the “incidental costs to the person of making the disposal” that may be deducted when computing a chargeable gain or allowable loss. These include professional fees to the extent that they are directly referable to the acquisition or disposal of the asset in question. However, whether a particular item of expenditure meets this statutory requirement is a matter to be determined on the evidence before the TAC.

132. The Determination at para. 125 states that the Taxpayers did not claim the relevant advisor fees as part of their CGT computations on the basis that they were “deemed unconnected with the transactions”.

133. There is no indication of any evidence that was put before the TAC to contradict that position or to establish that the fees were incurred wholly and exclusively for the purposes of entering into, or disposing of, either the GFC or FECD transactions.

134. In circumstances where no evidential basis was advanced to demonstrate the required connection under section 552, I am satisfied that it was open to the TAC to find that the fees did not constitute incidental costs of acquisition or disposal for CGT purposes.

VIII. SUMMARY 135. It is only appropriate to put the findings in this judgment into context. It is to be observed that both the Supreme Court in O’Flynn and the Court of Appeal in Hanrahan have described the general anti avoidance rule in section 86 and section 811 as “mind numbingly complex”. A case of this sort therefore is likely to present significant challenges at each stage of the process.

136. Next, the detailed Court of Appeal joint judgment in Hanrahan of Butler J. and Donnelly J., which comprehensively considers section 811 and its application to a

71 capital gains tax issue, had not issued at the time of the Determination and therefore the TAC did not have the benefit of the reasoning therein.

137. In addition this judgment should not be construed as representing a different opinion to the TAC under section 811. In this judgment, for the reasons described above, this Court has adopted the approach that this Case Stated does not require this Court to “step into the shoes” of the TAC and form its own opinion about these transactions. Nor does this Court propose to reconsider the evidence in some effort to re do that exercise.

138. Rather, the analysis above indicates a number of legal errors that are material to, and go to the core of, the decision reached in the Determination, namely:-

(i) there has been a misinterpretation of the expert evidence; (ii) there has been a failure to give adequate reasons for the conclusion reached on a matter on which there was expert evidence; (iii) there has been an error in relation to the allocation of the legal burden in relation to an important issue of statutory interpretation; (iv) there has been a failure to apply the statutory interpretation methodology required by the case law (Heather Hill); (v) there has been a failure to adequately consider the purposes of sections 31 and 607 TCA 1997; (vi) there has been a failure to adequately consider “misuse” and “abuse” contained in section 811(3)(a)(ii) in the context of section 811 as a whole; and (vii) there has been an error by applying an incorrect statutory interpretation test of imagining what the Oireachtas would have “envisaged” as to whether the transactions are to come within section 811.

139. These findings go to the core of the Determination and the reasoning of the TAC and mean that the Determination cannot accordingly stand in terms of its substantive conclusion that the transactions amounted to tax avoidance within the meaning of section 811. The TAC’s findings on the fees however will not be disturbed for the reasons set out above.

72 IX. ANSWERS TO CASE STATED QUESTIONS 140. Accordingly for the foregoing reasons, the Questions raised are answered as follows:-

1. Did the Commissioner err in law in wrongly concluding that the purpose of section 31 TCA, as intended by the Oireachtas, is to provide relief to ameliorate actual financial hardship correlating to actual monetary loss and in so doing did the Commissioner not adequately consider, or ignore, the decision of Stack J in Dermot Hanrahan v Revenue Commissioners [2022] IEHC 43?

Answer:- This question was not addressed in this form to any degree as the decision of Stack J. had, by the time this Case Stated was heard, been overturned by the Court of Appeal. In addition there appears to be an error in that the question proceeds on the premise that the TAC “wrongly” concluded about the purpose of section 31 and then asks is that “wrong” conclusion an error of law. Read literally, on its own terms, the question answers itself.

To the extent that the question should now be read as to whether the TAC erred in law in relation to his interpretation of section 31 TCA 1997 and the purpose thereof, I am satisfied for the reasons set out above that he do so err in law.

2. Did the Commissioner err in law in failing to identify any purpose for section 607 TCA 1997 before concluding that the Appellants had misused section 31 TCA 1997?

Answer:- Yes, for the reasons discussed above. The purpose behind section 607 was not properly considered and accordingly there is no proper conclusion as to how this provision was being misused or abused.

73 3. Did the Commissioner err in law in holding that section 31 TCA 1997 had been misused by the Appellants, having regard to the purpose for which it was enacted?

Answer:- Yes, for the reasons discussed above.

4. Did the Commissioner err in law in failing to conclude that taken separately each of the GFC and FECD transactions had a commercial purpose of probable and / or potential gain, and taken together had a commercial purpose of risk mitigation and / or hedging?

Answer:- For the reasons discussed above, the error was made in the actual conclusions reached by the TAC and the failure to assess the evidence of the experts correctly and to give reasons for departing from the evidence of the experts. However, this Court does not conclude, for the reasons set above, that the only conclusion open to the TAC was to accept the Taxpayers’ expert evidence.

5. Did the Commissioner err in law in reaching conclusions as to the probabilities of outcome for the GFC and FECD transactions in circumstances where there was no expert evidence to support same and by the mistaken analysis of concluding that the actual outcome established the a priori probability of same?

Answer:- Yes, although it is not clear how material this is.

Based on the written submissions of the Revenue, the Revenue appear to accept the evidence of the Taxpayers’ expert that the FECD transactions had a 90% probability of success: see para. 70 of the Revenue’s written submissions.

To the extent that the TAC’s Determination indicates the probability of success may have been in the range of 90-95% or even 95% then I am satisfied that this represents an error of law as it was based on the opinion of an expert who was not qualified in that 74 field and the reasoning, in so far as it was based on the actual outcomes of the transactions, is not adequately reasoned to justify relying on the view of the expert in that respect.

6. Did the Commissioner err in law in concluding that the transactions entered into by the Appellants were entered into primarily to give rise to a tax advantage?

Answer:- Yes, by virtue of the errors as discussed above. The TAC reached this conclusion for the stated reason that “the Commissioner was unable to identify any commercial motive for the investment apart from the deemed tax advantage derived”; see para. 116 of the Determination. This conclusion emerges from the previous finding in para. 55 of the Determination that the Revenue’s expert was “was unwilling to agree that the transactions of a type undertaken by the Appellants was hedging”. That conclusion, in turn, is unsustainable based on the actual evidence given by the Revenue’s expert in cross-examination. On at least four occasions, the Revenue’s expert plainly accepted that the transactions could be seen as hedge of the other. Faced with this scenario, it was not necessary that the TAC accept the evidence of the experts, but if he wished to depart from the evidence of the experts then he had to give a reasoned analysis as to why he was doing so based on the principles contained in the case law discussed above.

Equally, if (as appears to be the case) he took the view that the experts disagreed about the point, the TAC had to set out reasons why he preferred the opinion of one expert over the other.

This finding does not mean that the TAC had to accept the evidence of the Taxpayers’ expert or even that he had to accept the evidence of both experts that these transactions could be regarded as a hedge of each other. He could have come to a different view provided he explained why he disagreed with their view and the reasons they gave; see Donegal Investment Group.

7. Did the Commissioner err in law in holding that there was a tax avoidance transaction (as defined in section 811 TCA 1997)? 75 Answer:- Yes, based on the legal errors identified in the decision section of this judgment.

For the reasons set out earlier, the evidence of the Revenue’s expert has been misunderstood. Consequently there has been no reasoned consideration of the actual evidence of the experts. This undermines the conclusion reached about the purpose of the transactions. Next, there was a fundamental error made by the TAC that the Taxpayers bore the burden to establish the purpose of the statutory relief provisions. Next, the TAC has erred in his interpretation of the Relief Exclusion in section 811(3)(a)(ii) and in, so far as it can be ascertained, his interpretation of the purposes of sections 31 and 607. Consequently the conclusion that these were tax avoidance transactions constitutes an error of law.

For clarity, this answer is not based on an opinion of this Court as to whether or not the transactions when viewed together do or do not amount to tax avoidance.

8. Did the Commissioner err in law by following authorities from the UK rather than established Irish precedent to the contrary?

Answer:- This question cannot be resolved on the basis of the material before the Court as neither side established the premise upon which the question is based.

This question was not clearly debated by either side in their submissions or at the hearing. To the extent that it can be understood, it appears to suggest that the TAC followed UK authorities such as Ramsay and Aberdeen Construction Group Ltd rather than Irish cases such as O’Flynn, Hanrahan and possibly Airspace Investments Ltd v Moore (1994) V ITR 3. However, there is no clear finding or conclusion by the TAC that he was following UK cases rather than “established Irish precedent”.

9. Did the Commissioner err in law in concluding that the loss for CGT purposes should be restricted to the “actual financial loss”?

76 Answer:- Yes. The Material Facts indicate that there was an actual loss on the FECD transactions. The purpose of section 31 was not considered properly for the reasons explained above.

10. Did the Commissioner err in law in concluding that the loss for CGT purposes should exclude a deduction for advisor fees?

Answer:-

No, for the reasons described above. The Taxpayers failed to develop their submissions on this issue to any degree during the hearing and did nothing to displace the submissions of the Revenue as set out in para.s 72-73 of the Revenue’s written submissions or the relevant finding of the TAC in the Determination at para. 125.

141. I will hear from the parties as to the form of the orders required and as to costs.

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