Court refuses to block Revenue’s €3m VAT bill against builder

A BUILDING company alleged by the Revenue Commissioners to have entered agreements with an auctioneering firm to avoid VAT has lost a court challenge to a notice that it was liable for more than €3 million in VAT.

Mr Justice Iarfhlaith O’Neill ruled the notice of assessment of VAT for €3,085,021 raised by the Revenue against Viera in December 2006 was valid.

The case arose after the Revenue in 2004 noted discrepancies between sales figures reported in the company’s financial statements and the total annual gross sales figures returned by it for VAT purposes.

The Revenue initiated a VAT audit and learned Viera had entered into licence agreements with McPeake Auctioneers, a firm engaged to sell housing units built by Viera.

Mr Justice O’Neill said those agreements were essentially to let dwellings to McPeake on a short-term basis, thereby purportedly surrendering possession to the auctioneers.

The objective of this arrangement was to make Viera liable for VAT on the lower value of the cost of land or buildings only, rather than the higher full-selling price as under Section 4 of the VAT Act 1972.

The Revenue told the company it did not accept the propriety of this scheme.

Revenue raised a notice of assessment for €3,085,021 to cover VAT due on the selling prices of the company’s properties for the years ending August 2003 and August 2004.

The company challenged the Revenue notice on several grounds, all of which were dismissed by Mr Justice O’Neill in his reserved judgment.

The judge ruled the Revenue official dealing with the matter had adequate information before him at the relevant times to raise the assessments.

That information had come from the company itself, he noted.

On the basis of that information, the official concluded the licence agreements were “a device to avoid VAT”, the judge said.

The official therefore had ample reason to believe an amount of tax was due and payable by Viera and was able to calculate the amount due by reference to the material before him.

The volume and quality of information available to the official meant his opinion was bona fide, sustainable and not unreasonable, the judge said.

He rejected other arguments that the assessment was void in light of time limits applying to the raising of assessments.

There was “gross culpable and inexcusable delay” by the company in bringing additional arguments that the assessment was made out of time, and the company was out of time in bringing such claims, Mr Justice O’Neill found.