Killarney Consortium C v Revenue Commissioners (Approved) [2024] IEHC 732 (20 December 2024)

Killarney Consortium C v Revenue Commissioners (Approved) [2024] IEHC 732 (20 December 2024)

Section 96(12) of the VATCA 2010, by requiring a cancellation sum that effectively claws back VAT deductions already lawfully made after the exercise of the option to tax, is incompatible with EU law, specifically Articles 167 and 168 of the Principal VAT Directive and the principle of fiscal neutrality. Member States' discretion to restrict the option to tax does not extend to retroactively limiting deductions already acquired. The High Court upholds the Commissioner's decision to disapply the national provision as contrary to EU law.

Citation
[2024] IEHC 732
Parties
Appellant/respondent: Killarney Consortium C; Respondent/appellant: The Revenue Commissioners
Jurisdiction
Ireland
Judgment Date
20 December 2024
Procedural Posture
Case Stated (tax Appeal) / High Court Judgment on Case Stated From Tax Appeals Commission
Outcome
Assessment reduced to zero; national law disapplied as incompatible with EU law.
Legal Topics
VAT Deduction Rights, Option to Tax, Compatibility of National Law With EU VAT Directive, Fiscal Neutrality, Adjustment of VAT Deductions
Tax Law European Union Law VAT Deduction Rights Option to Tax Compatibility of National Law With EU VAT Directive Fiscal Neutrality Adjustment of VAT Deductions

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Parties

Killarney Consortium C

Appellant/respondent

The Revenue Commissioners

Respondent/appellant

Procedural Posture

Case Stated (tax Appeal) / High Court Judgment on Case Stated From Tax Appeals Commission

Legal Issues

  1. 1 Whether section 96(12) of the VATCA 2010 is incompatible with EU law regarding the right to deduct VAT after exercising the option to tax and subsequent sale of property
  2. 2 Whether the requirement to pay a cancellation sum under Irish law constitutes an impermissible clawback of VAT deductions under EU law
  3. 3 Whether Member States' discretion under Article 137(2) of the Principal VAT Directive allows for such a cancellation sum

Ratio Decidendi

Section 96(12) of the VATCA 2010, by requiring a cancellation sum that effectively claws back VAT deductions already lawfully made after the exercise of the option to tax, is incompatible with EU law, specifically Articles 167 and 168 of the Principal VAT Directive and the principle of fiscal neutrality. Member States' discretion to restrict the option to tax does not extend to retroactively limiting deductions already acquired. The High Court upholds the Commissioner's decision to disapply the national provision as contrary to EU law.

Court Disposition

Assessment reduced to zero; national law disapplied as incompatible with EU law.

Orders

  • Section 96(12) VATCA 2010 disapplied for this case
  • VAT assessment for period 1 September 2017 to 31 December 2017 reduced to zero