Both parties to cut-price Australia Hall deal, fighting tax claims

In separate proceedings the against the Commissioner for Tax, the Labour Party is contesting an identical additional duty penalty

A.H. Development, the company which purchased Australia Hall in a deal with Labour, is fighting a demand by the taxman that it pay a €14,426 additional duty penalty, in a similar case to that filed by the Labour Party over the controversial sale.

The company, which is owned by shareholders in the Fino group had already paid some €72,130 in duty over the acquisition of the six square kilometres of land which it purchased at a paltry €582,343 from the Labour Party in 2014.

In separate proceedings the against the Commissioner for Tax, the Labour Party is contesting an identical additional duty penalty.

In July 2014, the party transferred the land – over 6,100sq.m of developable land in Pembroke – to A.H. Development for just €582,343, and in a statement said the final price took into consideration unspecified outstanding debts with the buyers.

in December 2014, the Commissioner for Tax instructed architect Hector Zammit to carry out a valuation of the property sold.

Zammit tagged his valuation at €5.5 million, for which the Commissioner of Tax proceeded to issue a further charge of €49,176 to the Labour Party.

After both the Labour Party and A.H. Development objected to the valuation, a second architect was appointed by the court to value the property.

This time, the value of the property was slashed to €2,025,000, incurring an additional tax charge of €14,426.

In the second valuation, Architect Paul Micallef offered a more lenient appraisal of the land, pointing out that Australia Hall was scheduled and had to be restored under strict supervision of heritage authorities. “The market price of land in the same area is in the region of €1,000 to €1,200 per square metre. However, since the land cannot be fully developed and the existing premises was scheduled, in my opinion the value of the land is €400 per square metre taken as freehold.”

Micallef placed the market value at just over €2.4 million, but also deducted the capitalised ground rent (20 times €20,964), to get a value of €2,025,000. Consequently, a revised tax demand was issued for €87,096.98, which included an additional tax of €14,426. Despite the generous revaluation downwards, the parties still objected to the figure.

In a January 2015 letter from A.H. Development’s lawyer, Prof. Ian Refalo, objected to the tax and additional tax being claimed, saying the additional chargeable value was incorrect and that the valuation ignored the legal encumbrances of the land – an annual ground rent of €20,964.35 – and the “state of affairs” when the transfer was made.

He said A.H. Development had a right to purchase the land under a promise of sale agreement which was the subject of litigation. “This naturally limits the value which the property could fetch on the market and the valuation should have taken into account these legal encumbrances,” Refalo argued.

There was no other consideration for the property other than that stated in the deed, said the lawyer, arguing that the additional tax had been wrongly raised “as there was no element of wrongdoing.”

The case continues in October.

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