Vieira Ltd v The Revenue Commissioners

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 22 October 2015
• Neutral Citation: [2015] IESC 78
• Court: Supreme Court
• Docket Number: [Appeal No: 414/2009]
• Date: 22 October 2015

[2015] IESC 78

THE SUPREME COURT

Clarke J.

Macmenamin J.

Dunne J.

[Appeal No: 414/2009]

Between

Vieira Limited

Applicant/Appellant

and

The Revenue Commissioners

Respondent

Taxation – Value added tax – Assessment – Appellant seeking to challenge the lawfulness of the raising of an assessment by the respondents for substantial additional sums of VAT – Whether inspector of taxes had a sustainable basis for having reason to believe that tax was due by virtue of not accepting the technical argument on self-supply advanced by the appellant

Facts: The respondents, the Revenue Commissioners, conducted an audit of the affairs of the applicant/appellant, Vieira Ltd. In the course of that audit, questions were raised as to whether certain arrangements entered into by Vieira relating to property, which had formed the basis of Vieira”s acknowledged VAT liability, had the VAT consequences for which Vieira contended. Certain discussions ensued, but ultimately an assessment (or, on one view, two assessments) for substantial additional sums of VAT were raised by the Revenue. Vieira unsuccessfully challenged the lawfulness of the raising of such an assessment or assessments in the High Court. Vieira appealed to the Supreme Court against the findings of the High Court. Vieira suggested that the evidence did not support the Revenue”s factual contention that Halifax plc and ors v Commissioners of Customs and Excise (Case C-255/02) [2006] ECR I-01609 was a separate, standalone basis.

Held by Clarke J that the relevant Revenue official did actually rely on a Halifax type basis as a standalone, independent and fall back ground for having reason to believe that the amounts of tax specified in the relevant assessments were due. In those circumstances, Clarke J held that it was unnecessary to consider whether the inspector of taxes also had a sustainable basis for having reason to believe that the tax was due by virtue of not accepting the technical argument on self-supply advanced on behalf of Vieira. There was, in Clarke J”s view, a sustainable basis, in any event, for having reason to believe that the relevant sums were due on Halifax type grounds. That, of itself, was held to be sufficient to meet the ‘reason to believe’ test irrespective of precisely how the threshold for meeting that test is defined. Clarke J was satisfied that the proper interpretation of s.23 of the Value Added Tax Act 1972 permits the Revenue to raise two or more separate assessments in respect of consecutive VAT periods or groups of consecutive VAT periods. Clarke J was also satisfied that, on the evidence, two separate assessments were raised in this case, each relating to six consecutive two-month VAT periods. He was also satisfied that the notice of assessment given under s.23 meets the requirement to give notice in respect of each separate assessment by virtue of the fact that, on its second page, the VAT estimated to be due, the VAT paid and the balance said to remain outstanding are each separately set out in respect of the two accounting years which formed the subject of the separate assessments. In those circumstances, Clarke J held that it was unnecessary to deal with the third issue raised by the Revenue as to whether it was open, in all the circumstances of the case, for Vieira to argue the single assessment point.

Clarke J held that he would dismiss the appeal.

Appeal dismissed.

Judgment of Mr. Justice Clarke delivered the 20th October, 2015.

1. Introduction

1.1 While the underlying system by which many taxes are collected has changed significantly as a result of the introduction of self-assessment, the question of the raising by the Revenue Commissioners of an assessment to tax remains an important part of that system. In general terms, many provisions of taxation legislation permit, in particular circumstances, the Revenue Commissioners or an appropriate official to raise an assessment. In order for such an assessment to be raised, it is normally required that a relevant person has reason to believe that the tax in question is due. One such provision is to be found in s.23 of the Value Added Tax Act 1972 (‘the VAT Act’) which permits the raising of an assessment where a relevant Revenue official has ‘reason to believe’ that the total amount of VAT properly payable is greater than the tax actually paid.

1.2 In this case, the respondents (‘the Revenue’) conducted an audit of the affairs of the applicant/appellant (‘Vieira’). In the course of that audit, questions were raised as to whether certain arrangements entered into by Vieira relating to property, which had formed the basis of Vieira's acknowledged VAT liability, had the VAT consequences for which Vieira contended. Certain discussions ensued, but ultimately an assessment (or, on one view, two assessments) for substantial additional sums of VAT were raised by the Revenue.

1.3 Vieira unsuccessfully challenged the lawfulness of the raising of such an assessment or assessments in the High Court. Vieira has appealed to this Court against the findings of the High Court. In order properly to understand the issues which arose on this appeal it is necessary to say something about the facts and the relevant provisions of the VAT Act.

2. The Facts

2.1 Vieira was engaged in the construction of houses. It entered into a series of licence agreements with an auctioneer, the terms of which it will be necessary to address in a little more detail in due course. It is Vieira's case that those licence arrangements created a so-called self-supply which had the effect of raising an immediate, although relatively low, obligation to pay VAT, but also, it is said, had the effect of removing the houses which were subject to the licence agreements from the VAT net so that no VAT was said to be payable when the houses ultimately were sold to third parties. By the time these issues came to be debated between Vieira and the Revenue, Vieira had accounted for VAT on what it contended was a correct basis. The assessment or assessments raised by the Revenue represented the difference between the VAT actually paid by Vieira and an amount calculated as being due on the basis of the Revenue's view that VAT ought properly to have been charged on the properties when they were ultimately sold. Those two views as to the proper tax treatment of the situation form the backdrop to the issues which arise on this appeal.

2.2 For present purposes, it is sufficient to note that Vieira entered into licence agreements on the 5th January, 2004, with a Joseph McPeake who was an estate agent. Vieira is, in those licence agreements, described as the Licensor while Mr. McPeake is described as the Licensee.

2.3 The substance of each of the licences is to be found in clause 1, which provided that the Licensor grants to the Licensee ‘licence to enter upon and use and occupy the Property subject to the terms and conditions hereinafter appearing’. The term ‘the Property’ was defined by reference to a schedule which specifies an individual house within the development then being undertaken by Vieira. It would appear that separate licences were entered into in respect of different aspects of the development.

2.4 More specifically, clause 3 provided that the Licensee (i.e. Mr. McPeake) could enter onto the property whenever he wished and that he should ‘have possession of the Property during the period of this agreement’. The agreements did not provide for any payment by Mr. McPeake as Licensee. Each licence was expressed, in clause 13, to be for a period of fourteen days subject to the parties agreeing to a longer period, but also subject to a proviso for termination in the case of default and automatic termination (under clause 14) in the event of the sale of the relevant property by Vieira to a ‘third party purchaser’.

2.5 The Revenue, in the person of Mr. Aidan O'Brien, an inspector of taxes, commenced a VAT audit in respect of Vieira on the 23rd August, 2005. The audit concerned six separate two-month VAT periods encompassing a twelve-month period ending on the 31st August, 2004. That twelve-month period corresponded with Vieira's accounting year. Mr. O'Brien met with Vieira's auditor and a solicitor from Matheson who was advising Vieira. Certain explanations and discussions took place at a meeting during which Vieira's case as to the proper tax treatment for VAT purposes of the relevant transactions was put forward. Thereafter, certain correspondence was exchanged between Mr. O'Brien and Matheson in which Mr. O'Brien argued for a different tax treatment to the one on which Vieira's VAT return had been based and Matheson put forward the argument in favour of Vieira's view.

2.6 As noted earlier, the essential difference between the two sides centred on the question of whether a self-supply had occurred for the purposes of the VAT Act as a result of Vieira entering into the relevant licence agreements with Mr. McPeake. In simple terms, the VAT Act defines self-supply as occurring in a range of circumstances. The broad intent of that aspect of the VAT Act is to cover a situation where goods are owned by a VAT registered person or body for the purposes of their business but where the goods concerned are, as it were, taken out of the business by being supplied to their owner in a private and non-business capacity. Thus, in a relatively straightforward example, a self-supply would occur where a person engaged in the business of selling white goods took a refrigerator, which had been purchased for the purpose of resale as part of the business, for his own use and installed it in his own home. That self-supply would give rise to a transaction on which VAT would need to be charged in accordance with the self-supply provisions of the VAT Act. However, if, on some subsequent occasion and wholly unconnected with the individual's business, the same...