When the Department of Finance released its Exchequer Returns last week for the first half of the year, much of the political and economic commentary concentrated on the impact of Covid-19 and the staggering inflows of corporation tax.

Tucked away in the detail, however, was a mysterious €581 million in a so-called ‘unallocated tax account’. The account is used by the tax authority to house money if there is incomplete information to allocate it to a particular taxpayer, or where payments are made on account during tax audits and audit settlements.

Normally, the sums of funds flowing through the account are relatively modest. The numbers for March-May 2020 were €43 million, €42 million and €55 million respectively. That is what made the additional half a billion euro so unexpected.

And it was also unexplained, with the government merely stating it was due to a complex tax issue that it expected to be resolved in July.

The fiscal monitor recorded that

“There is a significant balance, some €581 million, in the unallocated tax account in June. Revenue is following its standard procedures in accounting for receipts in this account. The higher than normal receipts relate to a complex tax issue and is expected to be resolved in July, whereby the money will be reallocated to the appropriate tax head.”

So, just what is the real reason behind the additional €570 million – a figure that helped push the Exchequer number for the first half of the year above its expected profile. Where did it come from, and why it is mired in such secrecy?

The answer lies in a €57 billion global pharmaceutical deal involving the maker of Botox and a last-minute switch to tax law aimed at stymieing the tax benefits of a property deal.


In thee middle of his Budget speech last October, between sections on property reform and health spending, the finance minister Paschal Donohoe announced a curious change to Section 9 of the Companies Act to impose a 1 per cent stamp duty on deals involving a so-called “cancellation scheme”.

The changes had been made to counteract the tax benefits of a particular deal: the €1.34 billion sale of Irish property giant the listed property fund Green Reit to Henderson Park. The deal involved the use of a cancellation scheme, a canny accounting device to reduce the tax bill when selling a company, specifically those on the stock market.

Donohoe and his team became aware of the move in the days before the Budget, and decided to react. The legislation was implemented immediately, and combined with other changes around Reits in the Budget, added a €65 million tax bill to the transaction.

However, the move also had big implications for US pharmaceuticals group AbbVie’s takeover of Dublin-domiciled peer Allergan, the maker of Botox.

The $63 billion (€57.2 million) tie-up, announced in July, was being carried out by way of a scheme of arrangement takeover structure, which involved Allergan cancelling its existing shares and issuing new stock to the acquirer.

Although Green was the target of the legislation, Allergan, as an Irish-domiciled company, was also caught by the stamp duty changes. This was despite the fact that its shares are traded in New York and its top executives operate from New Jersey.

The total stamp duty bill: a whopping €572 million.

It is this money now sitting in the unallocated tax account – waiting to be moved to a new home when the details are complete. Although it would seem to be a stamp duty matter because the tax is collected under that tax head, rather than e.g. corporation tax, no doubt the accounting for the payment on the government’s side will be straightened out over the next few weeks.

Despite the higher tax bill, the takeover went through. Indeed, the 1 per cent stamp duty is half the termination fee rate – equating to €1.26 billion – that AbbVie would have faced if it walked away from the merger.

AbbVie employs about 600 in the Republic, while Allergan employs 1,700.

The move highlights, yet again, the highly complex nature of international tax structures. Indeed, as the chairman of the Revenue Commissioners Niall Cody told The Currency last week, the authority has doubled its resources to managing the affairs of multinationals operating here.

Allergan is perhaps best known as the manufacturer of Botox – a drug used, among other things, to reduce the appearance of facial wrinkles, including frowns, and to induce the curling of lips. No doubt, the Minister’s budget move last October caused more than a facial expression or two to be employed by the company officials and members of the deal team. 

How Henderson park pleaded for clemency

There are no records of AbbVie or Allergan making representations to the government in relation to the tax change. Henderson Park, however, did make its position known.

Within days of the new rules being announced last October, Henderson Park dispatched a letter to John Hogan, the assistant secretary general at the Department of Finance with responsibility for tax. The ask was simple: the company was seeking clemency on the new tax rules.

Specifically, it sought “transitional provisions” in respect for certain changes to Sections 28 and 60 in the Finance Bill. The UK fund also sought mitigations for companies that were mid-deal when the new rules were introduced before.

Such transitionary periods are common – the notorious Double Taxation Agreement were phased out over a multi-year period giving users time to restructure and reform.  However, the department was nor for moving.

Further reading:

When business met politics: Green Reit, Henderson Park and the plea for clemency on surprise €65m tax bill

As Henderson Park navigates tax and a pandemic, Green Reit founders begin corporate move to access spoils of €1.34bn sale

The short goodbye: How Takeda shifted $30bn from Dublin to Osaka with the stroke of a pen (and some deft financial footwork)