Court ruling could open way to €50m VAT windfall for companies

IRISH firms are in line for a potential €50 million cash windfall on VAT receipts.

However, everything will hinge on a ruling from the European Court of Justice and the figure could be substantially higher, according to Pascal Brennan of consultants Deloitte.

The key will be the outcome of a test case in the French Supreme Court. At the core of the case is the argument put by Societe Thermale D’Eugenie-Les-Bains that deposits paid by no shows should not be subject to VAT.

The French Supreme Court has now referred the case to the European Court of Justice. If the European court finds in favour of the company, that judgment will apply to Irish companies in similar circumstances, said Mr Brennan.

If companies who take deposits which they retained in the case of no shows, and accounted for VAT on them, they may be due money back from the Revenue.

“It may result in VAT repayments for Irish hotels, car hire companies, restaurants, sports centres, and any other business that takes deposits and retains them in the case of no shows”, according to Deloitte.

The case was referred to the European court of Justice recently and it will be months or possibly years before there is a decision.

In the meantime Deloitte is recommending that companies who stand to gain from a favourable ruling need to take action in order to protect their long term interests.

“If you are potentially affected we recommend that, to protect your position, you lodge a protective claim now,” Deloitte said.

To put a final figure on how much is due back to Irish businesses was difficult at this stage, Mr Brennan added.

But if the ruling covers a four-year period the amount could well exceed the €50m minimum by a very significant amount.