Marketing firm wins €2.55m Vat battle with Revenue

Firm argued it is entitled to full input deduction in accordance with law

After five days of evidence at the Tax Appeals Commission, commissioner Clare O'Driscoll ruled in favour of the firm in regards to Vat repayments ranging from 2016 to 2020. Picture: Laura Hutton/RollingNews.ie

A marketing company engaged in building brands has won a €2.55m Vat battle with Revenue.

Revenue rejected the firm’s €2.55m Vat repayment claims from 2016 to 2020, and now the firm has succeeded in part, showing that the Revenue were wrong to refuse the cumulative €2.55m repayments on appeal at the Tax Appeals Commission (TAC).

After five days of evidence at the TAC, commissioner Clare O’Driscoll has concluded that Revenue’s decision to refuse the appellant’s claim for the repayment of Vat be varied and Revenue shall repay to the firm the input Vat incurred by the company relating to its economic activities for the periods July to August 2016, to November to December 2020.

Ms O’Driscoll has also found that Revenue shall, following a detailed apportionment exercise between the parties, repay to the firm the input Vat incurred by the company relating to its non-economic activities where there is a direct and immediate link with the company’s output transactions which give rise to a right of deduction for the periods July to August 2016, to November to December 2020.

In her ruling, Ms O’Driscoll cited sections of the EU Principal Vat Directive as envisaged by the EU Court of Justice.

Ms O’Driscoll has directed that both sides will have to go through a detailed apportionment exercise to establish the precise details and amounts to determine the Vat to be repaid to the firm.

Ms O’Driscoll said that for her to make a determination as to apportionment, following such an exercise would have required an oral hearing of weeks if not months.

The organisation is registered for Vat and is engaged in economic and non-economic activities. In its argument before the TAC, legal representatives for the company contended that the firm is entitled to full input deduction in accordance with the law and case law concerning Vat input deduction.

The hearing was told that the appellant firm conducts a mixture of activities which are both taxable and outside the scope of Vat.

It stated that the case law of the EU Court of Justice has clarified that inputs used by a business both for taxable supplies and for outside the scope of Vat activity enjoy full Vat input deduction notwithstanding their partial utilisation for outside of the scope of Vat activity.

The case may ultimately be decided by the High Court as a note at the end of the 91 page ruling states that the TAC has been requested to state and sign a case for the opinion of the High Court in respect of the determination.