A former chairman and MD of aluminium manufacturer, Aughinish Alumina in Limerick, claims negligent advice from his tax adviser led to him facing a bill for €3.3 million in back taxes, interest and penalties.
Damien Clancy is suing Kennelly Tax Advisers Ltd, Mespil Road, Dublin, over advice the firm gave to him telling him he could avail of what is known as "Transborder Relief" whereby he was told he would not be liable on his international earnings. He said it later transpired he was not entitled to such because of conditions laid down in tax law.
Mr Clancy, who lives in Limerick, joined Aughinish in 1979 as a chartered engineer and became MD in 2003. The company was then owned by Glencore and was taken over by the Russian firm UC Rusal in 2007.
In an affidavit, Mr Clancy said that in 2013 the management team was reorganised in order to allow him take on more work as an international consultant and in preparation for his planned retirement as MD in 2014.
He was contracted with Cypriot firm WW Alumina Trade Co Ltd and he was to provide international consultant services at locations including Russia, Ukraine, China and Brazil.
He said to facilitate this he received advice from the defendant, and in particular Eoin Kennelly, who he said told him that under Transborder Relief he would not be liable for Irish income tax on his international earnings. He said he was also told that while he would have to register for tax in Cyprus, he would not have to pay any income tax in Cyprus.
He said from 2013, his tax returns disclosed to Revenue the income he was getting via the Cypriot company but the tax payable was calculated on the basis he was eligible for Transborder Relief.
"If I had been aware I was not entitled to Transborder Tax Relief, I would not have entered into an agreement in those terms or arranged my tax affairs in the manner advised by the defendant", he said. He said despite his queries over the years, the defendant repeatedly advised and reassured him his tax affairs were in order.
In April 2019, Revenue queried his returns for 2015-17. In 2020, he became aware steps would be necessary in relation to his Cyprus tax affairs and that he may have an outstanding liability there.
In December 2021, Revenue told him he owed some €621,000 including €173,000 in interest and €21,000 in penalties. Kennellys told him not to worry, he said.
In June 2022, he reached a €641,943 settlement with the Cypriot tax authorities for 2016-2020 and was told by the defendant this would lead to a resolution of issues with Revenue.
In November 2022, Revenue sent him a final demand for €745,456 and, on the defendant's advice, an appeal was lodged with the Tax Appeals Commission.
The Revenue then rejected the certificate from the Cypriot authorities which meant he faced a new tax bill in Ireland.
Revenue, although they had agreed to limit retrospection to 2015, they had threatened to go back to 2013/14 when Mr Clancy received a total income of €3.2m without any tax being paid in Ireland or Cyprus. He was not informed by Mr Kennelly that his case was before a tax appeals hearing in last April.
Arising out of that, Mr Clancy was informed he now owed €3.3m to Revenue for 2015-21, including interest of €864,000 and €90,000 penalties. Mr Kennelly had signed a settlement agreement on his (Clancy's) behalf to pay €3.3m even though he said he never authorised him to do so.
He then sought legal advice and brought proceedings.
The case was entered into the Commercial Court on Monday on consent between Declan McGrath SC, for Mr Clancy and Joe Jeffers SC, for the defendant.
Mr Justice Denis McDonald approved directions and said it can come back next March.
