Irish VAT Updates

VAT on clamp release fees

On 21 May 2021, the Supreme Court delivered its judgment in Nationwide Controlled Parking Systems Limited v Revenue Commissioners (2021 IECA 150). The case concerned whether VAT was chargeable on clamp release fees payable by motorists to Nationwide Controlled Parking Systems (“NCPS”). NCPS operates car parks under licence from landowners. Where vehicles are parked in breach of the car park rules, NCPS clamps the vehicle until a fee is paid for the clamp release. The Tax Appeal Commission (“TAC”) determined in 2018 that the clamp release fees were essentially damages for trespass (or a payment in lieu thereof) and were not subject to VAT. However, the High Court and now the Supreme Court have disagreed with the characterisation of the fees as damages. The Supreme Court held that the fees were in fact payment for a service (being the removal of the clamp) and as such are subject to VAT.

VAT recovery on property acquisition costs

The TAC has released a determination (72TACD2021) confirming that a taxpayer was entitled to recover VAT on professional fees incurred on acquiring commercial property with the benefit of “legacy leases”. A legacy lease is a lease with a term of 10 years or more which was granted before 1 July 2008. Under the rules in effect at that time, VAT on a legacy lease was chargeable on an upfront capitalised value when the lease was granted rather than on the on-going lease rentals. As the VAT was charged upfront, the acquirer of a property with a legacy lease already in place would not charge any VAT on the ongoing lease rentals. Consequently, Revenue challenged the acquirer’s entitlement to VAT recovery on costs connected with acquiring the relevant properties to the extent they were let under legacy leases. While the determination considered a number of complex provisions in Irish and EU law, ultimately, the Appeal Commissioner found in favour of the taxpayer on the basis that the acquisition costs could be linked to the taxpayer’s overall economic activities of the letting of property which included both legacy leases and leases granted after 1 July 2008 on which VAT is being charged on an on-going basis. It is possible that the determination may be appealed by Revenue to the High Court.

Upcoming VAT deadlines

Revenue ebrief 109/21, issued on 26 May, reminded charities of the 30 June 2021 filing deadline for refund applications under the Charities Compensation Scheme for VAT paid in 2020.

In addition, non-EU established businesses who are not required to register for VAT in Ireland, and who meet the conditions for claiming refunds of Irish VAT incurred have until 30 June 2021 to submit repayment claims in respect of Irish VAT incurred in 2020.

As a reminder, new VAT rules for e-commerce businesses come into effect on 1 July 2021. Businesses that sell goods to consumers in other EU member states should take steps to consider these obligations and register for the new One Stop Shop, the registration portal for which is currently open.

EU VAT Updates

Payment of interest

The Court of Justice of the EU (“CJEU”) has recently issued two judgments on the payment of interest, one on the payment of interest to taxpayers and the other on the payment of interest by taxpayers.

In technoRent International and Others (C-844/19), the CJEU held that the Austrian tax authorities are obliged to pay interest to taxpayers where certain VAT repayments are unreasonably delayed. While Austrian law provided for the payment of interest in respect of delayed VAT repayments to overseas businesses, it did not include similar provisions for delayed VAT repayments made to taxpayers registered for VAT in Austria. The CJEU held that the principle of fiscal neutrality required that interest should be paid to taxpayers where VAT repayments are unreasonably delayed (whether the repayment results from excess VAT inputs or an adjustment of output VAT) and that the Austrian Courts are required to interpret their national laws so as to give effect to this. By comparison, Irish VAT law contains provisions for the payment of interest where there are delays in repayment of VAT refunds.

In ALTI (C-4/20), the CJEU considered the tax authority’s right to apply interest where a taxpayer was liable for VAT due by another person under joint and several liability provisions. The CJEU was asked whether the Bulgarian secondary liability rules were compatible with the Principal VAT Directive as they made the recipient of a supply jointly and severally liable to pay default interest as well as the unpaid VAT on a supply made to it. In its judgment on 20 May 2021, the CJEU held that the VAT Directive does not prevent the imposition of default interest on the recipient of a supply, provided it is proved that the recipient, when claiming an input credit on the supply, knew or should have known that the output VAT on the supply would not be paid by the supplier.

David Duffy is Indirect Tax Partner at KPMG