Vieira Ltd v Dermot O'Donagain (Inspector of Taxes)

• Jurisdiction: Ireland
• Judge: Ms. Justice Máire Whelan
• Judgment Date: 15 December 2021
• Neutral Citation: [2021] IECA 334
• Court: Court of Appeal (Ireland)
• Docket Number: Court of Appeal Record No. 2018/271

In the Matter of a Case Stated Pursuant to Section 941 of the Taxes Consolidation Act 1997

Between:

Vieira Limited

Appellant

and

Dermot O'Donagain (Inspector of Taxes)

Respondent

[2021] IECA 334

Whelan J.

Murray J.

Pilkington J.

Court of Appeal Record No. 2018/271

THE COURT OF APPEAL

License agreements – Case stated – Reference – Appellant seeking a reference to the CJEU – Whether the High Court judge erred in law

Facts: The appellant, Vieira Ltd (Vieira), appealed to the Court of Appeal from the order of the High Court (Costello J) of 11 May 2018, perfected on 30 May 2018, answering in the affirmative two questions of law posed at the request of the appellant in a consultative case stated by Judge Linnane of the Circuit Court on 21 March 2017. The case was stated pursuant to s. 941 of the Taxes Consolidation Act 1997 (TCA), as applied to VAT by s. 25 of the Value Added Tax Act 1972, as amended (VATA). By way of notice of appeal dated 27 June 2018, Vieira contended that the High Court judge erred in law in: (i) holding that the license agreements entered into by Vieira, between March 2003 and August 2004, in the course of its business constructing a housing development in Tyrellstown, Co. Dublin, did not constitute lettings of relevant properties for VAT purposes and thus did not give rise to a self-supply; (ii) holding that the license agreements did not constitute a surrender of possession of the relevant properties for the purposes of s. 4(3) VATA and thus did not give rise to a self-supply; and (iii) conflating the issue of whether the license agreements constituted lettings or a surrender of possession, with the application of the Halifax doctrine (Halifax plc and ors v Commissioners of Customs and Excise (Case C-255/02) EU:C:2006:121, [2006] E.C.R. I-01609), which, further, should have been applied by invoking the special regime set out in s. 811 TCA. Vieira sought to have the order of the High Court set aside and the assessment to VAT raised by the Revenue Commissioners reduced to nil. In addition, Vieira requested the Court of Appeal to make a reference to the CJEU as to whether the Revenue Commissioners were entitled to raise an assessment to VAT on foot of the Halifax principle in circumstances where there was a national measure (s. 811 of the TCA) giving effect to such principle which had not been applied by the Revenue Commissioners.

Held by Whelan J that there was ample evidence before the trial judge which she analysed with a high degree of granularity which led her to informed and fact-based evaluative findings that the license agreements constituted neither a lease/letting nor a surrender of possession. Whelan J held that even if the license agreements had the effect intended by Vieira and could be construed as leases or in the alternative surrenders, same would have been liable to redefinition under the Halifax doctrine, as the trial judge correctly concluded. Whelan J held that the trial judge correctly concluded on the evidence in light of the relevant authorities that the transactions were “purely artificial” in nature. Whelan J held that the trial judge’s conclusion that the “principal aim of the licence agreements was to obtain a tax advantage” was a valid conclusion that flowed from her evaluation of the relevant jurisprudence and its application to the salient facts identified by her. Whelan J held that the assessment to VAT on the sales of the dwelling houses to third party purchasers/consumers was correctly raised, either on the basis that the license agreements constituted neither a letting of immovable property nor a surrender of possession within the meaning of VATA, or, if they did so constitute leases or surrenders, following the application of the Halifax doctrine so as to set aside the intended effect of the license agreements for abuse of rights. Whelan J was satisfied it was a reasonable and valid determination by the Revenue Commissioners on the facts and on their evaluation of the impugned arrangement that it was on balance not a matter that was optimally or appropriately to be dealt with by the invocation of s. 811. Whelan J held that the trial judge’s finding that it was not necessary to make the preliminary reference sought to enable her to decide the specific matters at issue which were confined to the questions raised by the Circuit Court judge in the consultative case stated was reasonable and warranted in all the circumstances. Whelan J held that no basis had been made out for directing a preliminary reference by the Court of Appeal in all the circumstances.

Whelan J held that the appeal would be dismissed on all grounds. Her provisional view was that the respondent, Mr O'Donagain (Inspector of Taxes), was entitled to costs of the appeal.

Appeal dismissed.

UNAPPROVED

NO REDACTION NEEDED

Judgment of Ms. Justice Máire Whelan delivered on the 15 ^th day of December 2021

Introduction

1 . This is an appeal from the order of the High Court (Costello J.) of 11 May 2018, perfected on 30 May 2018, answering in the affirmative two questions of law posed at the request of the appellant, Vieira Ltd. (“Vieira”), in a consultative case stated by Her Honour Judge Linnane of the Circuit Court on 21 March 2017. The case was stated pursuant to s. 941 of the Taxes Consolidation Act 1997 (hereinafter “ TCA”), as applied to VAT by s. 25 of the Value Added Tax Act 1972, as amended (hereinafter “ VATA”).

2 . The first question submitted for the opinion of the High Court concerned whether a series of licence agreements entered into by Vieira, between March 2003 and August 2004, in the course of its business constructing a housing development in Tyrellstown, Co. Dublin were effective to create either a letting of immovable goods, or to constitute a surrender of possession of dwelling houses for the purposes of VATA such that each license agreement constituted a “self-supply” pursuant to s. 4(3)(a) and s. 3(1)(f) VATA. If the agreements were so effective, the consequence would be to divert from a “VATable” business purpose to a non-taxable or exempt purpose thereby obviating the necessity for Vieira to account for VAT on the sale of each dwelling house to the end purchaser or consumer.

3 . The licence agreements were in each case entered into between Vieira and Mr. Joseph McPeake of McPeake Auctioneers, who had been at all material times the sole estate agent in respect of the sales of units in the said development. Typically a license agreement was only entered into and executed in respect of each property after a binding contract for sale had been concluded by a prospective purchaser and prior to completion of the said sale.

4 . Vieira argues that the licence agreements ought to have been accepted by the High Court at face value as having the effect intended by the parties of constituting a letting or, in the alternative, a surrender of possession of each property for the purposes of VAT. Vieira contends that it has duly paid VAT of about €4.4M on the self-supply measured as VAT arising on the site cost and the construction cost of each dwelling house the subject matter of a licence arrangement.

5 . In essence the dispute in monetary terms is whether Vieira's VAT liability was discharged when it paid the said sum of €4.4M or whether VAT is additionally payable on the sale price of each dwelling house. It is the differential between the two that is at issue.

6 . In the event that it determined that a self-supply for VAT purposes did arise on foot of the licence agreement under either scenario posited by Vieira, the court had to consider the second question of law posed in the consultative case stated. This was directed to whether the arrangement embodied in the licenses constituted an abuse of rights in light of the jurisprudence of the Court of Justice of the EU (“CJEU”), including Halifax plc and ors. v. Commissioners of Customs and Excise (Case C-255/02) EU:C: 2006:121, [2006] E.C.R. I-01609 (hereinafter, Halifax) and subsequent cases. This issue involves, in essence and in accordance with the principles identified in those cases, a consideration of substance over form. In particular, a structure may fall foul of the Halifax abuse of rights doctrine for lack of economic reality or otherwise. It is contended that the trial judge erred in determining that the transaction effected by Vieira amounted to an abuse of rights within EU Law.

7 . Vieira further argues that the Halifax doctrine could only apply directly so as to set aside the arrangements derived from the licence agreements if no national procedure existed to address abuse of the provisions in issue. It contends that the Halifax doctrine ought not to have been applied when the respondent could have invoked the statutory regime under s. 811 of the TCA and that the failure of the Revenue Commissioners to operate the said procedure cannot be remedied by a subsequent court decision on the basis of “abuse of rights”.

8 . Vieira seeks to set aside the order of Costello J. dated 11 May 2018, perfected on 30 May 2018, which in effect held that the licence agreement was neither a lease nor a surrender for the purposes of self-supply under the VAT regime and separately found that the arrangement constituted an abuse of rights under the Halifax doctrine. Vieira asserts that the assessment to VAT raised by the Revenue Commissioners on it should be reduced to nil.

The facts as found by the Circuit Court

9 . The facts as found by the Circuit Court are set out in full in the judgment of Costello J. delivered on 8 May 2018, [2018] IEHC 266.

10 . Briefly put, Vieira is a building development company incorporated and registered for VAT in this State. It was formed in order to develop a substantial housing development in Tyrellstown, Co. Dublin. The company built and sold houses – it was never in business as a landlord.

11 . The Tyrellstown development...