Revenue has updated its guidance in Waiver of exemption: Transitional Measures following the High Court judgment in Killarney Consortium C v Revenue Commissioners [2024] IEHC 732. The guidance confirms that from 20 December 2024, any cancellation amount resulting from the cancellation of a waiver will not be collected by Revenue.
Prior to the introduction of the new system for VAT on property (from 1 July 2008), leases were divided into short leases (those for a period of less than 10 years) and long leases (those for a period of 10 years or more). In general, short leases were exempt from VAT, but a landlord could waive this exemption.
Although no new waivers could commence from 1 July 2008 onwards, pre-existing waivers remained valid for a property which had been acquired by the lessor before that date. Furthermore, if a waiver was subsequently cancelled, the legislation included a clawback mechanism requiring a repayment to Revenue of any input VAT claimed in excess of output VAT paid under the waiver.
The waiver cancellation provisions were the focus of the Killarney Consortium case, whereby the consortium contended that EU VAT law does not impose a clawback solely because the level of input VAT deducted exceeds the output VAT paid. The High Court, in upholding the decision of the Tax Appeals Commission, held that the waiver cancellation in these circumstances was contrary to EU law and the principle of fiscal neutrality. The court affirmed that where a business is fully engaged in taxable supplies it is entitled to deduct input VAT on purchases made for the purposes of those taxable supplies.
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