‘What is the attraction of tax appeal cases?’ You may find yourself asking as you see yet another case in the national press. They’re hardly light reading, but, for tax advisors and accountants, they really do aid in the understanding of tax legislation and provide assistance when advising clients.
The case below is particularly interesting and was covered in a recent webinar we held about Artist Exemption. Art is very subjective, we know this, but in this case, the appellant makes cushions, throws, wall hangings and toys from pre-worn clothing and other recycled material. They’re all designed and handmade by the taxpayer. The taxpayer also creates pictures on the works by means of embroidering, cutting and sewing and sometimes adding keepsakes and personal items from the commissioner of the item. The appellant made a claim for artist exemption on the basis that the works were original, creative and have cultural artistic merit.
Revenue refused the application on the basis that cushions, throws, and fabric wall hangings aren’t what they deem to be artistic. The appellant was, of course, not satisfied with this answer (I doubt anyone would be happy with a refusal!) and stated that each item is designed and created with the use of her imagination, creativity and artistic skill and that one must possess artistic capabilities to collate the information about the person’s clothing or personal items into a suitable design. Often the creations are made in memoriam for someone who has passed. The items cannot be recreated as they are made from pre-worn items and the purpose of her work is to capture, safeguard and preserve precious memories. The taxpayer stated that her work is a form of emotional support for grieving families who may have commissioned a teddy bear, for example, out of a blanket of a child that has passed. Her work is so much more than just a mass-produced cushion or wall hanging that could be found at your local shop.
Now, in order to acquire artist exemption, the following is required:
- Original/Creative – a work of creative quality brought into existence by the exercise of creative imagination
- Cultural merit – enhances to a significant degree one or more aspects of national or international culture
- Artistic merit
And if it is non-fiction work (autobiographies for example), there are additional criteria that needs to be met:
- Arts criticism, history
- Artists’ diaries
- Belles-lettres essays
- Literary translation, criticism, history, diaries
Revenue accepts that the taxpayer's work was original and creative and that it had cultural/artistic merit. However, they contended that the taxpayer's work did not satisfy all the conditions of the exemption. Revenue submitted that it was not possible to interpret section 195 TCA1997 and the guidelines for the time being in force thereunder, so as to grant the exemption in respect of the Appellants’ work. Revenue stated that by refusing the exemption they weren’t disparaging towards the taxpayer's work in any way and that the matter of exemption being attained required the taxpayer to demonstrate compliance in all relevant legal tests and that basically what was being produced was commercial.
The taxpayer was not ready to give up, and so appealed that the toys fell in within paragraph 1(e) – a sculpture. Now a sculpture is not only a work of art carved from stone, wood, metal or other materials but also includes the creation of a 3D art object. And so therefore the toys fall within these guidelines.
And the appeal commissioner agreed!
So, the conclusion was to grant the exemption to this particular taxpayer. It just goes to show that what one might not consider art, another person might, so submit the application and see what they say.