High Court: Tax Appeals Commissioner assessment of “conditional contract” upheld

About this case:

• Citation:
  [2026] IEHC 682
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Ms Justice Siobhán Stack

Delivering judgment for the High Court in October, Ms Justice Siobhán Stack opined, “the contract for sale which TAC was considering was certainly, in substance, an option, as the purchaser had a discretion which appears to have been entirely untrammelled and covered a wide range of matters, not confined to planning alone, and covering almost anything a purchaser might normally enquire about before signing a contract in the first place.”

Background

In November 2002, the appellant bought a property in Kilcock, Co. Kildare for €500,000.

Subsequently, the appellant entered into a contract dated 22 December 2015 for the sale of the property for the significantly lower price of €125,000, representing a €375,000 loss.

That same year, the appellant had made a gain of €296,450 on the sale of shares, which had incurred capital gains tax in the sum of €81,074. If the appellant could write off his loss on the property sale against the gain on the shares disposal, he could reduce his capital gains tax (CGT) liability.

In order for the appellant to offset his loss against the gain on the shares, he needed to demonstrate that the loss on the disposal of his property was incurred in the tax year 2015. 

The appellant alleged that the disposal of the property was deemed to take place on the date of the contract, being the usual rule. The property transferred to the new owner in 2017.

However, s.542 (1)(b) of the Taxes Consolidation Act 1997 created an exception to the usual rule to the effect that where a contract is conditional, the time at which the disposal and acquisition is made shall be the time at which the condition is satisfied.

Revenue contended that the contract for sale was conditional as it was subject to special conditions, the first of which allowed the purchaser to withdraw from the agreement if not satisfied in relation to title, planning, lease and other matters pertaining to the property, and the second of which, inter alia, obliged the vendor to lodge an application for retention permission in respect of any unauthorised usage of the property. 

In those circumstances, Revenue assessed the appellant to capital gains tax on the disposal of the shares and, on appeal, the Tax Appeals Commissioner (TAC) agreed that the contract was conditional and that the disposal of the lands occurred in 2017, when the sale completed.

The appellant stated a case to the High Court, with the net issue for determination being whether the TAC erred in law in holding that the sales contract was conditional.

The High Court

At the outset, Ms Justice Stack noted that the appellant’s appeal was heard before the TAC and its determination issued prior to the delivery of Supreme Court’s judgment in Flaherty v. Revenue Commissioners [2026] IESC 4, the “seminal authority on the meaning of the phrase “where the contract is conditional” in s.542(1)(b)”.

Applying Flaherty to the facts of the case, the court considered it evident that the purchaser had a very wide discretion as to whether or not he would proceed with the purchase of the appellant’s property, having “on the face of it, gave the purchaser an untrammelled right, at any time prior to 30 June, 2016, to withdraw from the sale.” 

Finding that the principal obligation of the purchaser, to purchase the property for sale, was not “in substance or in reality” binding on him until after the purchaser had an opportunity to investigate the very wide range of matters set out in the special conditions, Ms Justice Stack outlined “As Murray J. put it in Flaherty, there was a contract between the parties, but performance of the principal obligation - to purchase the lands - was conditional on the purchaser subsequently becoming satisfied to proceed.”

The court was satisfied that the contract was, “in substance, an option, as the purchaser had a discretion which appears to have been entirely untrammelled and covered a wide range of matters, not confined to planning alone, and covering almost anything a purchaser might normally enquire about before signing a contract in the first place.”

As to the argument that the TAC had erred in finding that the contract was invalid as it was concluded well before the appellant became registered as the full owner of the property, Ms Justice Stack pointed out that this was not particularly material as the TAC had made it perfectly clear that the contract was in the nature of an option to purchase in any event, and was one to which s.542(1)(b) applied.   

Conclusion

In circumstances where the contractual conditions were not complied with until 2017 and where the disposal was not deemed to have occurred until the conditions were complied with, the High Court took the view that the TAC had not erred on any issues raised in the appeal.

Doolan v The Revenue Commissioners [2026] IEHC 682