Irish Tax Bill: €2m Development Yields €61,000 Tax Liability
Man Loses Tax Appeal Over €168,000 in Disallowed Trading Losses
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A man has lost his appeal to the Tax Appeals Commission (TAC) against a Revenue assessment for €168,120 in disallowed trading losses, stemming from a land purchase in 2005. The commission upheld Revenue’s position that the man was not engaged in a trade and thus not entitled to claim the losses.
Land purchase and Initial Claims
The appellant purchased a site for €330,000 in 2005, financed by a loan, and subsequently claimed trading losses of €168,120 between 2008 and 2015. Revenue disallowed thes losses, arguing the individual wasn’t conducting a trade. Appeals Commissioner Simon Noone agreed with Revenue, stating the claim was “based on the incorrect and inaccurate basis that he had been engaged in trade.”
‘Flipping’ Houses: The Appellant’s Plan
The man testified to the TAC that his intention was to purchase the site to build and “flip” a small number of houses. He envisioned attracting “big spenders” and generating a profit of €500,000 on the frist house, using those funds to finance subsequent builds.He projected a total profit of approximately €2 million from the development, perhaps building three to five houses, or even more.
He explicitly stated he wasn’t buying the land to build a home for himself.the site remains undeveloped to this day, with the appellant stating, “it’s still there.” He also admitted he hadn’t registered for VAT, explaining, “I figured nothing had happened yet.”
Property Crash and Abandoned Plans
When questioned about abandoning his development plans in 2007, the appellant attributed the failure to external factors, stating, “the plans abandoned me…the environment changed,” referencing the 2008 property market crash.
TAC Findings: Lack of Trade and Urgency
Commissioner Noone found a “distinct lack of urgency” in the appellant’s efforts to develop the site. Crucially, he concluded the evidence did not support the claim that the appellant ever intended to engage in the trade of land development.
Several factors contributed to this finding:
No Prior Experience: The appellant had no prior experience in land development.
Lack of Funding: He did not secure funding specifically for the construction of the homes.
No Planning Applications: No applications for planning permission where ever submitted.
Agricultural Zoning: The land remains zoned for agricultural use, indicating no concrete steps were taken towards development.
The TAC’s decision underscores the importance of demonstrating genuine trading activity when claiming trading losses for tax purposes. simply purchasing land with a speculative intention is insufficient to qualify as engaging in a trade.