Discharged bankrupt not liable to pay surcharge penalty

High Court - whether or not surcharge payable by the discharged bankrupt (the taxpayer) on foot of a notice of opinion issued by the Revenue Commissioners pursuant to s. 811 of the Taxes Consolidation Act, 1997 (the TCA) to the effect that a pre adjudication transaction was a tax avoidance transaction is a pre or post adjudication debt or liability which is provable in the taxpayer’s bankruptcy pursuant to s. 75 of the Bankruptcy Act, 1988 as amended - in 2006 the taxpayer made capital gains in excess of €121 million on the disposal of his interest in certain property and shares - in December, 2006 he entered into a transaction (the impugned transaction) relating to the acquisition of certain German bonds which reduced the taxpayer’s capital gains tax return for the year 2006 by €2,693,799 - reduction in this amount claimed in 2007 - in 2010 the Revenue Commissioners anti-avoidance unit (direct taxes) notified the taxpayer that it would commence an audit of the impugned transaction pursuant to s.811 of the Taxes Consolidation Act, 1997 (“TCA”) - in July 2011 taxpayer adjudicated bankrupt - in December 2011 a report on the impugned transaction was furnished to the nominated officer for his consideration under provisions of s. 811 of the TCA - nominated officer formed the opinion that the impugned transaction was a tax avoidance transaction within the meaning of s. 811 and he determined that the tax advantage in the sum of €2,693,799 should be withdrawn from the taxpayer and a surcharge was payable pursuant to s. 811A of the TCA - taxpayer appealed against the determination - appeal rejected - taxpayer initially sought to appeal again to Circuit Court, however official assignee withdrew appeal in 2016 - Revenue notified taxpayer that determination conclusive - taxpayer notified that, while Capital Gains Tax was pre-adjudication debt, surcharge imposed by Section 811A Taxes Consolidation Acts, 1997 on that capital gains tax charge is post-adjudication debt on the basis that it only arises when arises when the notices of opinion becomes final and conclusive, i.e. when appeal withdrawn - final demand issued in 2017 - taxpayer contends that the liability to CGT and to the surcharge levied pursued to s. 811A related to a “tax” event, CGT from 2006, which predated the bankruptcy of the taxpayer - section 136 of the Bankruptcy Act, 1988 prohibits any creditor’s remedy against the property or person of the bankrupt - s.75 of the Bankruptcy Act provides that Debts and liabilities, present or future, certain or contingent, by reason of any obligation incurred by the bankrupt or arranging debtor before the date of adjudication or order for protection...shall be provable in the bankruptcy or arrangement - issue for determination therefore is: when was the obligation to pay the surcharge incurred - Court identifies judgment of Neuberger in Re Nortel GmbH [2014] AC 209 - Court finds statutory scheme is such that Revenue is entitled to inquire under s.811 TCA into any transactions whereby the taxpayer claims a benefit - Court finds that a possible outcome from such investigation is the withdrawal of a tax advantage (in this instance €2,693,799) and the levying of a surcharge by Revenue in respect of same - on this basis, Court finds that surcharge is a contingent liability incurred as a result of a pre-adjudication obligation - Court finds that surcharge amount is thus provable in bankruptcy - taxpayer is not liable for the surcharge amount.