The High Court has dismissed a claim by Kanwell Developments Ltd. against the Revenue Commissioners over the use of its VAT repayments to offset tax liabilities.
In a judgment delivered on 17 December 2008, Mr Justice John Hedigan found that Kanwell had requested the offsets made up to July/August 2002 and was aware of and had agreed to them. He also found that later offsets against Kanwell’s own tax liabilities were authorised under section 1006A of the Taxes Consolidation Act 1997, as amended. He found for the Revenue Commissioners and ordered that Kanwell’s claim be dismissed.
Kanwell said that between September 1999 and December 2002 it collected €16,930 in VAT and paid €1,372,366 in VAT on business purchases. It claimed a refund balance of €1,355,436, alleging that Revenue had refused to repay it and instead offset the money against tax liabilities of Moorview Developments Ltd. and Valebrook Developments Ltd., which were part of the Cunningham Group with Kanwell. Kanwell argued that it had not authorised the offsets and that any authority it had given ended on 27 September 2002.
Revenue disputed the claim’s premise. It said the refund amount did not need to be determined in the case; the issue was whether the offsets were permitted. Revenue maintained that Kanwell’s representatives had requested offsets against the other companies’ liabilities up to July/August 2002, and that later offsets were made against Kanwell’s own tax liabilities under statute.
The judge accepted the Revenue account of the earlier arrangements, citing witness evidence and letters from Kanwell representatives. He said the evidence showed that Kanwell had initiated the practice of treating the group companies together and had asked Revenue to “net down” their accrued liabilities. He concluded that no specific statutory authority was needed where a taxpayer requested that its repayment be applied in this way and no statutory prohibition applied.
For offsets relating to September/October and November/December 2002, the court found that these were made against Kanwell’s own liabilities, not those of another company. The judge accepted that a May 2003 letter from Kanwell confirmed the company’s acceptance of offsets against its PAYE/PRSI liabilities. He also found, on the balance of probabilities, that statutory notices for the offsets had been served. The judgment records that the plaintiff raised a pleading objection concerning these offsets, while Revenue agreed to meet the claim on them.
The court did not determine the precise refund amount. It dismissed Kanwell’s claim after finding the challenged offsets were requested, accepted or statutorily authorised, as applicable.