A private limited company receives a double refund of €3.5 million following years of proceedings concerning loss set-off. The Tax and Customs Administration’s system 'forgets' that the provisional refunds had already been reclaimed. The tax inspector corrects the error by issuing additional assessment notices. The private limited company argues that additional assessment cannot be made in respect of a loss set-off decision. The court rules otherwise. A computerised error in loss set-off can be rectified by means of an additional assessment.
Claim initially rejected, but later accepted
In 2011, the private limited company filed its 2010 corporation tax return, reporting a loss of €17.3 million. It applied for a provisional loss carry-back to the years 2007, 2008 and 2009. The tax inspector grants provisional refunds totalling €3.5 million. In 2014, the tax inspector issues the final assessment for 2010, showing a positive taxable amount. He does not accept the loss and recovers the provisional refunds via that assessment. The private limited company lodged an appeal and, following proceedings up to the Supreme Court, was ultimately successful in 2022.
System generates a duplicate refund
The inspector must now issue final loss set-off decisions. A member of staff enters the loss into the system. The system automatically generates decisions, but does not take into account the fact that the provisional refunds had already been reclaimed in 2014. Result: the private limited company receives a further €3.5 million. An internal email reveals that the staff member was unable to make any adjustments to the offsetting of the provisional refunds. The system no longer contained that information.
Not a new fact, but a recognisable error
In this case, the inspector cannot impose a supplementary tax assessment on the basis of a new fact. After all, the inspector was aware of what had happened. He therefore resorts to imposing an additional tax assessment on the grounds of a manifest error. The private limited company argues that a loss set-off decision is not a tax assessment and that an additional tax assessment cannot be imposed on that basis. The court rejects this argument.
An automation error, not an assessment error
The company further argues that this constitutes an error of assessment which cannot be rectified by means of a supplementary assessment. The court takes a different view. The error was caused by automated processing, not by the inspector’s incorrect understanding of the facts or the law. The fact that the staff members concerned recognised the problem but were unable to intervene manually does not alter this. Moreover, the error was apparent to the private limited company: it received €3.5 million twice.
Systemic risks should not be borne by society
The court refers to the parliamentary history. Errors resulting from the automated process should not be borne entirely by the Tax and Customs Administration. The financial gain of an individual taxpayer arising from a recognisable error must not be passed on to society. The additional tax assessments were correctly imposed.