The High Court upheld a VAT assessment of €1,944,340 against building developer Vieira Limited, ruling that agreements giving its sales agent access to houses at the Tyrellstown development did not amount to lettings or surrenders of possession and were an abusive practice aimed principally at obtaining a tax advantage.
In a judgment delivered on 8 May 2018, Ms Justice Costello answered “Yes” to both questions referred in a case stated appeal. The questions concerned whether the Circuit Court was correct in law on the character of the agreements and on abuse of rights. The judgment did not make a new assessment; the court concluded that the Circuit Court had been correct, leaving the assessment to stand.
Vieira developed the Tyrellstown housing scheme in phases between 2001 and 2009. For the second phase, it entered into 198 written, 14-day licence agreements with McPeake Auctioneers after contracts had been signed for the houses. The agreements allowed the agent to show properties to prospective buyers. The company had accounted for VAT on the arrangements as self-supplies, but did not account for VAT on the later house sales. No licence fee was demanded or paid, and the agent continued to have access after the stated two-week period.
Vieira argued that the agreements were either lettings of immovable property or surrenders of possession, triggering VAT as self-supplies and preventing VAT on the subsequent sales. The court rejected both arguments. It found that the arrangements served the sales process, rather than making properties available for passive occupation in return for payment. Vieira also retained access: its foreman and contractors could enter the houses, including to complete works. The court concluded that the agreements did not transfer exclusive possession and that, at most, the parties shared possession.
On abuse of rights, the court accepted that the arrangements gave rise to a tax advantage contrary to the purpose of the VAT rules. It considered whether obtaining that advantage was their essential aim. The court accepted that the sales agent had concerns about buyers misunderstanding differences between showhouses and second-phase homes, including design changes following building regulation changes. But it said the Circuit Court had not found that the licences increased sales or accelerated their completion. The licences covered every contracted house, including final homes that could not function as useful surrogate showhouses; the court also pointed to their short duration, unpaid fees and the developer’s continuing access. It concluded that the transactions were artificial and that obtaining a tax advantage was their principal aim.
Vieira also asked the court to refer a question to the Court of Justice of the European Union about the interaction between the EU abuse-of-rights principle and Ireland’s anti-avoidance law. The judge declined because a ruling was not necessary to decide this case, leaving the question for a future case where it might be required.