AMERICAN PHARMACEUTICAL COMPANY Perrigo has failed in a High Court bid to overturn a €1.64 billion Irish tax demand.

The Irish-registered firm — formerly known as Elan before it was acquired by Perrigo in 2013 — was hit with the revised tax assessment by the Revenue in 2018 over alleged underpayment of tax relating to a transaction with rival pharma company Biogen.

The revised demand relates to the 2013 sale to Biogen of Perrigo’s 50% interest in the intellectual property linked to multiple sclerosis drug Tysabri. 

Revenue categorised this sale as a capital rather than a trading transaction, meaning it was subject an effective tax rate of 33% rather than the standard 12.5% corporation tax rate.

Revenue issued the revised tax demand after an audit of the company in 2016. 

Perrigo last year took judicial review proceedings in the High Court, aimed at quashing the Revenue’s tax assessment. The case was heard over 7 days last June.

It also appealed the decision to the Tax Appeal Commission (TAC), where a decision on the matter was stayed last year pending resolution of the High Court action.

The company argued in court that the €1.64 billion tax demand was a breach of its legitimate expectation, an abuse of power and an attack on its constitutionally protected property rights.

Judge Denis McDonald dismissed the judicial review proceedings this morning.

In a lengthy judgment, Judge McDonald said that Perrigo had “failed to establish any basis to interfere with the assessment”.

However, he said, “The question whether the disposal of the Tysabri intellectual property constituted a trading or a capital transaction is a matter that will have to be resolved in due course before the TAC.”

Perrigo can also appeal today’s decision to the Court of Appeal. 

In a released statement after the judgment was published this morning, Perrigo chief executive Murray S Kessler said he continues to “feel strongly” that the company had “a legitimate expectation” that Revenue would not “retrospectively” and “without warning recharacterise Perrigo’s trade”.

“While we are disappointed the judge did not see it this way, this judicial challenge and decision related to the process of whether Irish Revenue should have been allowed to issue the tax assessment; it did not address the merits of the case,” he said.

“Perrigo will now either appeal the decision or move on to challenge the merits of the assessment before the Tax Appeals Commission, where we strongly believe the Company will ultimately prevail on the merits.

“Perrigo will continue to vigorously defend its position on behalf of shareholders and the Company remains focused on its consumer self-care transformation.”