The Supreme Court has dismissed an appeal by Edward Cussens, John Jennings and Vincent Kingston over VAT assessments arising from property sales, upholding findings that pre-sale lease and leaseback arrangements were an abusive practice.
The court said the Circuit Court’s factual findings were binding in the appeal. Those findings were that the arrangements had no commercial reality and were entered into to reduce VAT. The Supreme Court concluded that, on those facts and in light of the Court of Justice of the European Union’s ruling in the case, the arrangements could be disregarded for VAT purposes despite the absence of specific Irish legislation implementing the abuse doctrine.
The dispute concerned property transactions carried out before the CJEU’s 2006 judgment in Halifax, which applied the abuse doctrine in VAT matters. The CJEU later ruled, on a reference from the Supreme Court, that the doctrine could apply to earlier transactions and that legal certainty and legitimate expectations did not prevent its application in this case. It also said that, if abusive transactions were found, the remaining transactions could be subject to VAT under relevant national law.
The taxpayers argued that the CJEU’s answers were unclear and that a later CJEU ruling in a criminal VAT case raised a new issue warranting a second reference. The Supreme Court rejected both arguments. It said the CJEU’s ruling was clear and that the later case concerned the special protections applying to criminal law, so it did not cast doubt on the ruling in this appeal. The court also decided that the CJEU’s refusal to answer two questions about the compatibility of section 4(9) of the Value Added Tax Act 1972 with EU law did not prevent it from deciding the appeal.
The court separately addressed interest on any VAT due. It held that whether interest was legally payable was a matter of law, not a matter for the Circuit Court’s discretion, and that the issue was not properly before that court on the material in the case. The Circuit Court was therefore wrong to hold that no interest was payable. That answer does not prevent the taxpayers from arguing in appropriate proceedings that interest is not due.
The Supreme Court affirmed the High Court’s answers on the abuse doctrine and dismissed the appeal, subject to varying the answer on interest.