An Irish registered pharmaceutical company has been granted permission by the High Court to bring a judicial review application aimed at overturning a €1.6 billion tax demand by Revenue.

The action being taken by Perrigo Pharma International arises from an assessment for 2013, which altered the amount of tax Revenue claims is due from the company.

At the time of the issue in dispute, Perrigo was known as Elan Pharma International.

The amended assessment related to the sale in 2013 by Elan of its interest in the intellectual property (IP) for the MS drug Tysabri.

That deal was initially taxed as trading income at 12.5%, but Revenue after reassessing the transaction said it has been treated as a chargeable gain, which is subject to a higher tax rate.

Perrigo bought Elan eight months after it had sold the Tysabri intellectual property.

At the High Court on Monday senior counsel Paul Sreenan for Perrigo said his client strongly disputes the amended assessment, which was issued late last November. 

He said the company had conducted its business in Ireland for many years on foot of a certificate from the Minister for Finance, under the 1997 Taxes Consolidation Act, entitling it to a 10% rate of corporation tax. 

That tax rate was increased from 10% to 12.5% in 2005. Mr Sreenan said his client had a legitimate expectation that the sale of the intellectual property would attract the same corporate tax it had been paying for almost 20 years.

However, in October of last year Revenue said the IP sales transactions, including the sale of Tysabri, was not part of Perrigo's trade and should have been treated as chargeable gains subject to an effective 33% tax rate rather than the 12.5% rate.

As a result, the firm is seeking an order quashing the amended assessment issued by the Inspector of Taxes on the company for the period 1st January 2013 to 31st December 2013.  

The firm is also seeking declarations from the court including that the amended assessment is so unfair that it amounts to an abuse of power, is in breach of Perrigo's legitimate expectation and constitutes an unjust attack on and an interference with the firm's constitutional rights to property. 

Mr Justice Seamus Noonan said he was satisfied to grant the firm permission to bring its judicial review challenge. The defendants, Inspector of Taxes John McNamara, Revenue, the Minister for Finance and Ireland and the Attorney General, were not represented in court.

The Judge put the matter back to a date in April and put a stay on the company's appeal against the assessment which is pending before the Tax Appeals Commission until the High Court review has been determined.  

"Following a detailed review of the facts, we feel strongly that Elan Pharma, predecessor to Perrigo, had a legitimate expectation, based on an approximate 20-year history of tax filings in relation to the Company's trade in intellectual property, that Irish Revenue would not, many years later, recharacterize that trade and issue an assessment in this manner," the Perrigo President and CEO Murray S. Kessler said later in a statement in reaction to the court's decision.

"We will continue to vigorously defend our position on behalf of our shareholders."