This conflict between regulatory investigative powers and legal professional privilege was highlighted in the recent High Court case, Commission for Communications Regulation v Eircom Limited [ 2024] IEHC 49. During a ‘dawn raid’ ComReg seized thousands of documents from Eir and proposed to filter out legally privileged information through electronic searches. Eir contested that they themselves should conduct these searches to protect any confidential and legally privileged information. The High Court concluded that ComReg was not required to return the documents and was entitled to conduct their own search into the documents.

In the context of tax assessments, the decision of the High Court in Revenue Commissioners vs Tobin [2024] IEHC 196 has curtailed the application of the four- year statutory time limit for issuing amended assessments and eroded the little practical protection a taxpayer has when Revenue issue an assessment. In that case, though the four-year statutory timeframe imposed at that time by sections 955 and 956 of the Taxes Consolidation Act 1997 (“TCA”) had elapsed, Revenue argued that Mr. Tobin’s tax returns did not contain a full and true disclosure of all material facts necessary for making the assessment and, as such, were permitted to issue an amended assessment outside of the four years.  Revenue appealed the first-tier Determination of the Tax Appeal Commissioner finding in favour of the taxpayer. The High Court affirmed Revenue’s approach. It held that the test for what constitutes a full and true disclosure of all material facts is an objective one and equates to the complete accuracy of the tax return; the taxpayer’s subjective belief, however well founded, is irrelevant. This decision is a worrying development for taxpayers, as time limits serve as a crucial procedural safeguard to achieve tax certainty.  It seems a taxpayer may find itself in a Kafkaesque situation of having to prove that a tax return was substantively correct before it can rely on a procedural time limit designed to prevent substantive hearings. 

Revenue’s Investigative Powers

The Revenue Commissioners have wide ranging powers to obtain information from taxpayers, third parties, non-Irish tax authorities and others.  Where it is reasonable to suspect that tax offences have been committed, specific powers are vested in Revenue. These are contained in Part 38, Chapter 4 TCA and include:

The Power to obtain information from financial institutions

Pursuant to Section 908A TCA, Revenue officers have the power to apply to the courts for an order authorising an officer to take hold of the records of financial institutions when investigating a possible revenue offence.

The power to apply for a search warrant

Under Section 908C TCA, authorised officers may apply to the District Court for a search warrant where an investigation has a criminal element. The Warrant Holder may retain any seized material for as long as required for the criminal proceedings.

The power to apply for an order to produce evidential material

Where a Revenue officer has reasonable grounds to believe that a third party has possession of material that could be used in a criminal investigation, the officer has the power to apply to the District Court for an order requiring the third party to provide the evidential material either immediately or within a specified time-period.

Order to produce documents or provide information

Third parties may be required to produce documents or to provide information to Revenue by answering questions or making a statement in accordance with Section 908E TCA.

Changes to the Revenue Guidance

In line with the High Court’s decision in Commission for Communications Regulation  v Eircom Limited, Revenue have recently updated their guidance on the powers of authorised officers to apply for search warrants and how to treat material over which a claim of legal professional privilege is made by the taxpayer or its legal representative.

Where a taxpayer or their legal representative believe that a seizure of material in hard or soft copy may disclose confidential information, they must:

1. Allow the holder of the warrant (the “Warrant Holder”) to identify the relevant material and
2. Outline the reasons why the seizure of the material may conflict with legal professional privilege.

The Warrant Holder will determine whether a claim of legal professional privilege or privacy can be addressed onsite if it is reasonable to do so. If it is not reasonable to deal with claims during the operation of the search, the Warrant Holder will inform the taxpayer of the process by which a review of the material will be conducted and who will carry out the independent review.

If, subsequent to a search, privacy or legal professional privilege is claimed, or during a review by an authorised officer of the seized material information which may be subject to LPP is identified, this should be brought to the attention of Revenue Solicitors Division. The status of any material will then need to be independently determined. This guidance does not explain how it is envisaged this process would proceed.  The legal basis for Revenue’s approach is uncertain. Revenue’s guidance mirrors the policies adopted by other regulators with similar investigative powers following recent judicial decisions which may be subjected to further scrutiny in future cases by higher courts, particularly where the High Court judgment in Commission for Communications Regulation  v Eircom Limited arguably goes beyond the legal framework in this area outlined by the Supreme Court in CRH plc v The Competition and Consumer Protection Commission [2018] 1 IR 521.

Key Takeaways

• These recent developments in Irish caselaw and tax guidance emphasise the increasing reach of Revenue investigative powers and the subsequent erosion of taxpayer rights. As Irish Revenue have moved away from previous practices and taken a more legalistic approach, these developments highlight the importance of engaging with your solicitor as soon as possible when under investigation.
• Arthur Cox can provide an understanding of the approaches of the Revenue Commissioners to their clients, can advise clients on the correct approach to dealing with legally privileged information and can ensure that taxpayers’ rights are protected in an investigation.  This is a level of assurance which firms outside the legal sphere are not typically able to provide.
• The right of clients to obtain legal advice and to confidentiality in their communications with solicitors is protected under the Charter of Fundamental Rights of the European Union and the Irish Constitution. The importance of protecting client-attorney privilege in tax affairs was underlined in the recent CJEU decision in Case F SCS / Ordre des avocats -v- Luxembourg (C‑432/23) where the Court upheld the supremacy of legal professional privilege over national disclosure requirements of taxpayer information pursuant to DAC 6.