The recent judgment of the High Court in the case of Cussens & Ors v Brosnan, a VAT case which the taxpayer lost, deals with a wide range of issues-not just the VAT matter on hand but also the nature of appeals to the High Court.

The case concerned a structure involving the leasing of holiday cottages prior to their sale towards extinguishing the VAT liability arising on the ultimate sale. A number of points were at issue, the first of which was the validity of the leases. The learned judge found impediments in the mortgage documentation in regard to the leases-he concluded that “ …the purported leases to which I have referred are void”. Often that might have been the end of the matter, in terms of the judgment at least. On this occasion Mr Justice Charleton went on to consider the other points in the appeal, declaring it his duty to answer all of the questions raised on the case stated.

The judgment contains a detailed discussion on the issue of what constitutes “abusive practice” as derived from ECJ jurisprudence. Mr Justice Charleton appears to have given considerable weight to the Halifax case, and to the more recent case of Part Service Srl (Case C-425/06), citing its finding that “where the objective factors point to the essential aim of a transaction as being to obtain a tax advantage, there can be a finding of an abusive practice when the accrual of the tax advantage constitutes the principle aim of the transaction or transactions at issue”.

For “tax advantage” here we must read “VAT advantage”-it's not immediately clear how this judgment will sit with the dictum from the McGrath case (which concerned domestic, direct taxes) of the taxpayer's right to claim the letter of the law rather than its spirit or intention.

There were two additional matters addressed by the judge-whether or not the validity of the lease arrangements should be considered under EU law (he found not), and the appropriateness of the 12% rate of interest on the tax underpaid (on which Mr Justice Charleton was reluctant to opine in the absence of evidence).

For full details on the case see http://www.courts.ie/Judgments.nsf/09859e7a3f34669680256ef3004a27de/6ac557c51205a0988025746500334ea2?OpenDocument.