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J Quigley (Inspector of Taxes) v Maurice Burke

Whether an accountants workings are within the power and possession of the taxpayer

The taxpayer carried on a trade as an electrical contractor and appealed against an assessment for the tax year 1986/1987. He engaged an accountant to prepare accounts and subsequently employed an accountant to prepare and furnish to the Inspector of Taxes the necessary accounts and documentation. The Inspector was not satisfied with the documentation which he received and requested production of the nominal ledger prepared by the accountant as part of his working papers.

The issue which arose in the proceedings before the Circuit Court judge was whether a nominal ledger prepared by the accountant was in the power or possession of the taxpayer. The accountant maintained that the nominal ledger was part of his working papers, his property and was not in the power or possession of the taxpayer and that consequently, the taxpayer was under no obligation to produce to the Inspector of Taxes the nominal ledger. The Inspector of Taxes maintained that it was entitled to see all the accounting records of which the nominal ledger is an integral part, from which the accounts are prepared so as to be satisfied that the accounts reflected the full amount of the profits or gains for the relevant accounting period in accordance with TCA97 s65, s66, s67.

The Circuit Court judge held that the nominal ledger was the property of the accountant and the Inspector was not entitled to access to it or to insist that it be put in evidence. The matter was appealed to the High Court. The High Court decision of 18 April 1991 was appealed to the Supreme Court.r

Decision:

Hamilton J held that the documents were in the power or possession of the taxpayer in this case.

Basis for Decision:

The accountant was employed by the taxpayer to prepare and submit the accounts necessary in order to enable a proper assessment of his income tax liability to be made. The taxpayer was entitled to obtain the ledger from his agent, the accountant and consequently this ledger was in his possession or power within the meaning of TCA97. In his judgement he said that it was important to emphasise that the accountant was not engaged by the appellant for the purpose of preparing an audit of his business but rather as a tax agent for the purposes of preparing the necessary accounts and documentation to be used on behalf of the taxpayer in the appeal against the assessment to income made against the taxpayer for the year of assessment in 1986/1987. The question for determination was whether the taxpayer had the right to obtain from the accountant the said nominal ledger because if he had the nominal ledger was in his power and possession, he was obliged to produce it. In the case of Bula Limited v Tara Mines it is stated that “a document is within the power of a party if he has an enforceable legal right to obtain from whomsoever actually holds the document for inspection of it without the need to obtain the consent of anyone else.”

Decision:

Quotation at page 224
“It is important to emphasise that Mr. McElhinney was not engaged by the appellant for the purpose of preparing an audit of his business but rather as a tax agent for the purpose of preparing the necessary accounts and documentation to be used on behalf of the appellant in an appeal against the assessment to income tax —the appellant herein, was entitled to obtain this ledger from his agent, Mr. McElhinney and consequently this ledger was in his possession or power”.

Note:

The Supreme Court judgement was based on the alleged fact that the accounts had been prepared for submission to the Revenue by the accountant, acting as tax agent. This may not, in fact, have been the case.

Cases referred to in Judgement:

Bula Limited v Tara Mines Limited [1994] 1LRM 111.
Chantrey Martin & Co. [1952] 2AER 691.
Leicestershire County Council [I941] 2KB 205.

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