The High Court upheld the Appeals Commissioner’s determination on Last Passive Limited’s claim to recover VAT on costs connected with its Aircoach bus business. The court answered all three questions of law referred in the case stated in the affirmative, so it did not replace the commissioner’s conclusions with the alternative approach argued by the company.
Last Passive, which operates as Aircoach, sought a refund of €873,268.30 from the Revenue Commissioners. The dispute concerned a period governed by the Value Added Tax Act 1972. Passenger transport was exempt from VAT, while advertising was taxable. Under a contract with Viacom, now CBS Outdoor Limited, the company allowed advertising on 43 of its 59 coaches, inside the coaches and at some bus stops. Advertising accounted for 2% of turnover in the year cited in the judgment; passenger transport accounted for 98%.
The Appeals Commissioner had found that VAT on costs directly involved in running the coaches, including maintenance and fuel, was not deductible. Those costs were incurred to provide passenger transport and were not “dual-use inputs” for both the exempt transport service and taxable advertising. The commissioner allowed recovery for overheads not directly and immediately linked to the bus operation, using the 2% turnover share to calculate a recoverable amount of €1,897.99. The judgment says VAT on costs exclusively incurred to conclude the advertising contract could have been fully recovered, but no such costs were identified.
Aircoach argued that the coaches and their running costs supported both transport and advertising, making those costs partly recoverable. It also challenged the use of turnover to apportion overheads and raised fiscal neutrality and equal treatment. The Revenue Commissioners argued that the running costs were linked to the passenger service, and that turnover could be considered when assessing the use of dual-use inputs.
Mr Justice Michael White said turnover could be considered as a measure of use, although using it to the exclusion of use would be impermissible. He found no legal misdirection by the commissioner and concluded that the commissioner’s factual findings were ones reasonably open to him. The High Court therefore declined to substitute its own view, even though it said the company’s alternative arguments were persuasive. The ruling addressed the legal questions in the case stated; the judgment records no separate order directing payment of the claimed refund.