A housebuilding company has lost its appeal over a Revenue Commissioners' VAT assessment on houses which could leave it facing a bill for €3 million.

Vieira Ltd had appealed a High Court decision that the raising of the assessment was lawful but a three-judge Supreme Court dismissed the appeal after finding the High Court was correct.

Mr Justice Frank Clarke, giving the court’s judgment, said the Revenue had a sustainable basis for having reason to believe the total amount of VAT properly payable was greater than the amount actually paid.

Vieira had entered a series of licence agreements with auctioneer Joseph McPeake, which had the effect of removing houses from the VAT net so that no VAT was payable when the houses were ultimately sold on to third parties, the judge said.

The effect of this was to give possession, rent free, to Mr McPeake, of various properties for a 14-day extendable period. Parting with possession in this way was sufficient to create so-called “self-supply” situation, it was claimed.

Self-supply is covered in tax legislation to allow a businessperson take goods out of the business for private use and entitles them to a VAT deduction.

Vieira contended it had accounted for VAT on the correct basis.

A Revenue official disagreed and took the view the licence device “did not operate to take the property out of the VAT net”.

The official also said, even if it did, it was an abuse of rights in accordance with a 2006 European Court of Justice decision in the Halifax case.

Self-supply Dismissing Vieira’s challenge to that decision, the High Court held the official had ample “reason to believe” an amount of tax was due and payable and which the official could calculate by reference to extensive financial material.

Mr Justice Clarke said tax assessments for two periods, totalling just over €3 million, were raised.

The judge said the Supreme Court appeal was not concerned with determining whether that tax amount is due or whether the licensing arrangement with the auctioneer have tax consequences for Vieira.

The merits of whether the licence agreement created a self-supply arrangement were a matter which would ultimately be determined by the Revenue appeal commissioners, or if necessary, by the courts on appeal.