About this case:

• Citation:
  [2026] IESC 4
• Judgment:
  External link
• Court:
  Supreme Court
• Judge:
  Mr Justice Brian Murray

Delivering judgment for the Supreme Court, Mr Justice Brian Murray explained that the provision only operates where there is an enforceable contract under which one party has agreed to dispose of, and the other party to acquire, an asset the disposition of which is subject to CGT, where the obligation to dispose of and to acquire the asset is conditional upon an event, and where no contractual obligation to dispose of and to acquire that asset arises unless and until that event occurs.

Background

On 21 October 2015, the appellant executed an agreement for the sale of a fishing vessel for €5,000,000, along with the equipment on the vessel, all spare parts in his possession and for the capacity-tonnage of the vessel.

The appellant contended that the agreement was a conditional contract within the meaning of s.542(1)(b) of the Taxes Consolidation Act 1997, as it was subject to three conditions: the execution of a bill of sale, the application for and grant to the purchaser of a sea fishing licence required to use the vessel for sea-fishing, and the application for and issuing of a certificate of registration.

The terms of the contract indicated inter alia that a 10 per cent deposit would be paid and that on completion, the purchaser would pay €4,500,000 in exchange for the completion documentation, to be held in trust pending receipt of the bill of sale, spare parts and other documentation, and the capacity agreement.

‘Completion’ was to take place following the appellant’s receipt of the balance of the purchase monies, and the receipt by the purchaser’s solicitor of the documentation specified in the second schedule to the agreement, including the bill of sale and ‘confirmation of fishing entitlements’.

The appellant argued that the ‘fishing entitlements’ included the registration of the vessel, the licence and the capacity of the vessel, and that unless and until that documentation was delivered to the purchaser, no binding legal obligation on part of the purchaser to accept or pay for the vessel arose.

The appellant relied on s.542(1)(b) in contending that because the second and third of the purported conditions were not satisfied until 11 January 2016, only then did a disposal take place. 

On that basis, the appellant alleged that he was entitled to claim ‘revised entrepreneur relief’ on the disposal pursuant to s.597AA of the 1997 Act on the basis that same took place after 1 January 2016.

The effect of the relief would allow the appellant to pay Capital Gains Tax (CGT) at a reduced rate of 20 per cent on the first €1,000,000 of the chargeable gain on the sale. If the ‘disposal’ took place when the agreement was entered into, the appellant would be subject to the full rate of 33 per cent CGT on his gains.

The Revenue Commissioners refused the claim for revised entrepreneur relief and issued an assessment to CGT on 27 April 2018 in the sum of €130,000, finding that the requirements in schedule 2 of the agreement were procedural rather than conditional in nature.

On appeal, the Appeal Commissioner upheld the assessment, finding that the agreement did not contain conditions regarding the sale of the vessel and that the date of disposal was 21 October 2015.

The High Court and Court of Appeal

The Commissioner stated a case to the High Court, which largely agreed with the Commissioner’s conclusions. On appeal, the Court of Appeal dismissed the appeal, distinguishing between contingent contracts where obligations are contingent on a future event, and promissory contracts where one party agrees to perform an obligation. 

The Court of Appeal placed particular emphasis on the fact that the appellant was not free to sell the vessel after 21 October 2015, and highlighting that if the parties intended that the obligation to furnish closing documentation was a contingent condition precedent to any contract coming into existence, this would have been unusual and one would have expected a special condition to have been inserted into the contract to make that intention clear.

The Supreme Court granted leave to appeal against the decision of the Court of Appeal on the construction of s.542(1) of the 1997 Act, in circumstances where the form of contract used in the case might widely engage tax planning.

The Supreme Court

Mr Justice Murray clarified that the purpose of s.542(1)(b) of the 1997 Act is “to define the point in time at which a disposal (or for that matter, and where relevant, an acquisition) takes place for the purposes of Capital Gains Tax” and that the date of disposal is a “deemed date of disposal, not an actual one, and it is deemed solely ‘for the purposes of the Capital Gains Tax Acts’ (s. 541(1)(c) TCA)”.

The judge noted that “a contract can ‘be made’ for the disposal of an asset, but without the asset actually being disposed of” and that “the contract may never complete and in these situations no liability for Capital Gains Tax will arise because there has been no ‘disposal’. But if it does complete and there has, thus, been a disposal, the deemed date of disposal relates back to the date of contract, not of completion.”

Mr Justice Murray considered that the trigger for the section is disposal and acquisition under a contract, which directs attention to the source of the obligation which was performed by the transfer of the assets which constituted the relevant disposal. 

Noting that s.542(1)(b) is a derogation from the general rule that a disposal is deemed to occur on the date of the contract, the court highlighted that in this context, a conditional contract is one in which the condition operates to prevent legal obligations to dispose of and accept or pay for the asset from arising.

Mr Justice Murray further observed that conditions precedent to the existence of any contractual obligation of any kind are outside the scope of the provision, finding that such circumstances would be captured by s.542(1)(a) and that s.542(1)(b) “is solely concerned with a situation in which an asset is acquired or disposed of ‘under’ a contract, but in which there is a contract, and that contract is subject to a condition”.

The court proceeded to formulate a description of the circumstances in which s.542(1)(b) is engaged, noting that the provision only operates where there is a legally enforceable contract between the parties under which one party has agreed to dispose of, and the other party to acquire, an asset the disposition of which is subject to CGT, where the obligation to dispose of and to acquire the asset is conditional upon an event, and where no contractual obligation to dispose of and to acquire that asset arises unless and until that event occurs.

Mr Justice Murray distinguished the situation in which there is a contractual obligation to dispose of or to acquire the asset irrespective of whether the ‘event’ occurs, but where non-occurrence of the event may extinguish that obligation or allow a party to treat itself as discharged from any obligation of performance.

The judge reasoned that “the contract in issue here can only be properly described as ‘conditional’ if on its true construction the mutual obligations of the purchaser (to pay for and accept delivery of the vessel, the appurtenant equipment and its ‘capacity’) and of the appellant (to deliver same) were made by the contract contingent on the regulatory authorities allowing the transfer of tonnage, registering it as owner or granting an operative Sea Fishing Licence to the purchaser”.

On the basis of the evidence before the court, Mr Justice Murray concluded inter alia that the agreement was one where, if failure to obtain the licence or registration were to have any effect, it would discharge the agreement pursuant to which ownership of the vessel was transferred, but that it could not plausibly be said “that there was no contract for sale of any kind until that licence were issued”.

Conclusion

Accordingly, the Supreme Court determined that the appeal should be dismissed and save in two respects, that the questions in the case stated should be answered as proposed by the High Court and Court of Appeal.

Faherty v The Revenue Commissioners [2026] IESC 4