Ryanair's €770,000 stockbroker Vat case is referred to Europe
The Supreme Court has referred a case taken by Ryanair against the Revenue Commissioners to the European Court of Justice (ECJ).
The Supreme Court has said that in order to determine the appeal, certain questions on European law must be referred to the ECJ.
Just days after Aer Lingus floated on the stock market in 2006, Ryanair swooped in with an offer to buy its smaller rival for almost €1.5bn. The approach was rejected. Ryanair made subsequent efforts to buy Aer Lingus, all of which failed.
It sold its near-30pc stake in Aer Lingus to British Airways owner IAG in 2015, after the airline group successfully bid €1.3bn for the Irish carrier.
Ryanair sought to claim back Vat paid to stockbrokers in respect of the 2006 Aer Lingus takeover attempt.
The tax appeal commissioners rejected Ryanair's claim and the airline then appealed that decision to the Circuit Court.
The Circuit Court agreed with the appeal commissioners' decision, but referred the case for the opinion of the High Court in 2012.
Circuit Court Judge Jacqueline Linnane asked the High Court to determine whether she was correct in law in reaching her conclusion.
Counsel for Ryanair had argued in the High Court that Judge Linnane had erred in law on a number of grounds, including that the airline had provided evidence that it did not intend to hold shares in Aer Lingus as a passive investor -which would have constituted a "non-economic activity" for the purposes of a Vat deduction.
But in 2013, Judge Mary Laffoy agreed with the decisions of both the appeal commissioners and the Circuit Court.
Ryanair then appealed the High Court ruling to the Supreme Court.
Judge Frank Clarke, of the Supreme Court, said this week that he had concluded that it was necessary in order to determine the outcome of the appeal to refer certain questions of European law to the European Court of Justice.
He referred to relevant cases which demonstrated that in certain circumstances, the purchase of shares can amount to qualifying preparatory work directed towards an economic activity where Vat could then be considered an input cost and possibly be deductible.
"At the level of basic principle, however, there is a distinction between the purchase of shares for the purpose of holding as a passive investment, on the one hand, and the purchase of shares by a holding company for the purposes of engaging in the economic activity of providing management and other services to its subsidiaries, on the other," noted Judge Clarke.
"It is clear that the latter constitutes economic activity and amounts to the provision of a Vatable service. It is equally clear that the former does not," he added.
Ryanair never provided management services to Aer Lingus because it never took it over, but it insists that its ultimate intention was to provide those services, notwithstanding the fact that it did not succeed in its takeover attempt.
The Revenue Commissioners argued that paying professional fees in relation to a possible acquisition of a company, to which it is intended that management services might be supplied, could not amount, as a matter of law, to such a direct and immediate link.