Ryanair Ltd v Revenue Commissioners

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 27 March 2017
• Neutral Citation: [2017] IESC 19
• Docket Number: [Appeal No: 290/2013]
• Court: Supreme Court
• Date: 27 March 2017

[2017] IESC 19

THE SUPREME COURT

Clarke J.

Clarke J.

MacMenamin J.

Dunne J.

[Appeal No: 290/2013]

Between/

Ryanair Limited

Appellant

and

The Revenue Commissioners

Respondents

Value added tax – Deduction – European law – Appellant seeking to claim VAT paid as an input deduction – Whether appellant was entitled to claim VAT paid as an input deduction

Facts: The appellant, Ryanair, in late 2006, made a formal bid to acquire the shares of Aer Lingus. Ryanair engaged professionals to assist it in that bid and incurred liability to pay the professionals concerned. Those professionals were, in turn, required to charge VAT on their fees for they were engaged in providing a vatable service. The net question which arose on appeal was as to whether Ryanair was entitled to claim the VAT thus paid as an input deduction. The matter first came before the appeal commissioners who found in favour of the respondents, the Revenue Commissioners, and determined that Ryanair was not entitled to the deduction claimed. Ryanair appealed to the Circuit Court. Linnane J stated a case for the opinion of the High Court on the 17th February, 2012. She had concluded, in agreement with the appeals commissioners, that Ryanair was not entitled to the claimed deduction. However, she posed, for the High Court, the straightforward question of whether she was correct in law in reaching that conclusion on the basis of the facts found by her as set out in the case stated. The case stated was heard by the High Court (Laffoy J) with judgment being delivered on the 2nd May, 2013. Laffoy J, agreeing with both the appeal commissioners and Linnane J, concluded that Ryanair was not entitled to the claimed deduction. Ryanair appealed to the Supreme Court against that finding.

Held by Clarke J that, having identified two broad sets of issues which arose in the context of the appeal, the resolution of those issues involves questions of European law which are not acte clair and which require, therefore, to be the subject of a reference. Clarke J held that that it was necessary, for the purposes of determining the appeal, that the questions be referred to the Court of Justice of the European Union (the CJEU) under Art. 267 of the Treaty on the Functioning of the European Union.

Clarke J held that he would afford the parties two weeks within which they could make written observations on any aspect of the text of the proposed reference.

Referral to the Court of Justice of the EU.

Judgment of Mr. Justice Clarke delivered the 27 ^th March, 2017.

1. Introduction

1.1 The basic model of Value Added Tax is relatively straightforward. Persons or entities which carry out taxable activity charge VAT to those to whom they sell goods or provide services and pay VAT to those from whom they acquire inputs to their business again either in the form of goods or services. The taxpayer remits the difference to the Collector General. But as with many cases there can be grey areas around the precise application of VAT legislation to the circumstances of a particular case. Furthermore, VAT was introduced as a common form of tax across the now European Union. VAT legislation in member states of the European Union is, therefore, heavily influenced by European legislation and is, in turn, therefore, significantly influenced by the jurisprudence of the Court of Justice of the European Union (‘CJEU’).

1.2 All of those factors come into play on this appeal. It is a matter of wide public knowledge that the appellant (‘Ryanair’) sought to take over Aer Lingus on a number of occasions but, of particular relevance to this case, one such attempt occurred in late 2006 when a formal bid to acquire the shares of Aer Lingus was made. Hardly surprisingly Ryanair engaged professionals to assist it in that bid and incurred liability to pay the professionals concerned. Those professionals were, in turn, required to charge VAT on their fees for they were, undoubtedly, engaged in providing a vatable service. The net question which arises on this appeal is as to whether Ryanair is entitled to claim the VAT thus paid as an input deduction.

1.3 In the ordinary way the matter first came before the appeal commissioners who found in favour of the respondents (‘Revenue’) and determined that Ryanair was not entitled to the deduction claimed. Ryanair appealed to the Circuit Court. In the end, Her Honour Judge Linnane stated a case for the opinion of the High Court on the 17 ^th February, 2012. Her Honour Judge Linnane had concluded, in agreement with the appeals commissioners, that Ryanair was not entitled to the claimed deduction. However, she posed, for the High Court, the straightforward question of whether she was correct in law in reaching that conclusion on the basis of the facts found by her as set out in the case stated.

1.4 The case stated was heard by the High Court (Laffoy J.) with judgment being delivered on the 2 ^nd May, 2013 ( Ryanair Ltd v. Revenue Commissioners [2013] IEHC 195). Laffoy J., agreeing with both the appeal commissioners and Her Honour Judge Linnane, concluded that Ryanair was not entitled to the claimed deduction. Ryanair has appealed to this Court against that finding. I have concluded that it is necessary, for the purposes of determining this appeal, that certain questions of European law be referred to the Court of Justice of the European Union (‘the CJEU’) under Art. 267 of the Treaty on the Functioning of the European Union. There is annexed to this judgment a draft order of reference to the CJEU. In that context I propose briefly to address the issues.

2. The Issues

2.1 There is a sense in which there was much agreement between counsel on both sides concerning some of the basic principles to be applied. First, it is clear that, in order to be entitled ordinarily to claim VAT input deductions, a relevant person or body must be a taxable person...