RYANAIR has lost a claim it should be refunded €770,700 in VAT for professional services related to its unsuccessful 2006 bid to take over Aer Lingus.
The High Court's Ms Justice Mary Laffoy ruled yesterday the airline was not entitled to claim – as VAT deductible – its legal and stockbroking fees incurred in the takeover bid.
Ryanair had appealed a decision of the Revenue Commissioners that such fees did not relate to its core economic activity of air transport and was therefore not VAT deductible.
In October 2006, Ryanair succeeded in acquiring 29 per cent of Aer Lingus, but failed to get a 100 per cent shareholding due to a number of factors, including conditions imposed by the EU Competition Authority as well as resistance by the Government and trade union shareholders in Aer Lingus.
Ryanair had appealed the Revenue's decision on the VAT deduction to the Circuit Court which ruled against the airline. It then appealed to the High Court.
Yesterday, Ms Justice Laffoy said Ryanair was clearly not a "taxable person" for the purposes of EU and domestic legislation.
She also found against an argument by the airline that its intention to provide management services to Aer Lingus – in the event of a takeover – constituted an economic activity within the meaning of EU VAT directives and in keeping with European Court of Justice (ECJ) rulings.
She considered Ryanair's attempt to assimilate its position in relation to its intention to provide management services with the position of taxpayers in previous ECJ rulings was totally misconceived.
The only activity which the airline had carried out was the bid itself and that did not qualify as an economic activity within the meaning of EU directives.
The judge also refused a request from Ryanair counsel Martin Hayden to refer the issue to the ECJ for a ruling.
In its appeal, Ryanair had argued it 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. Revenue argued the mere holding of shares in a company does not constitute economic activity.