Vieira v Revenue Commissioners: when has Revenue “reason to believe” there was an underpayment of tax?

Whether the Revenue Commissioners have “reason to believe” that an accountable person has an outstanding tax liability which will warrant an assessment of liability under s 23(1) of the Value Added Tax Act 1972 will depend on the circumstances of the case. In some cases, the decision maker may be required to give consideration to a number of circumstantial factors before reaching that conclusion. In other cases though, there may be one single ground that provides reason to believe there is a tax liability, regardless of other factors. In this case, the Court held that once the test from the European Court of Justice in Halifax v Commissioners of Customs and Excise was met, that was sufficient reason for Revenue to make an assessment under s 23(1) of the 1972 Act.


Vieira is a property company that availed of “self-supply” arrangement which reduced its VAT liability. The arrangement gave an auctioneer a fourteen day licence to enter a property. O’Brien, a tax inspector, conducted an inspection of Viera’s accounts. After meeting Vieira’s tax consultants and receiving their submissions on the validity of the arrangement, and after consulting with technical and legal advisors within Revenue, O’Brien concluded that the self-supply arrangement was an abusive practice availed of for the purpose of reducing Vieira’s VAT liability. He therefore conducted an assessment of Vieira’s liability and notified it as required by s 23(1) of the 1972 Act. Vieira issued High Court proceedings challenging Revenue’s decision to conduct an assessment under the circumstances of the case.

1972 Act

23.(1) Where the Revenue Commissioners have reason to believe that the total amount of tax payable by an accountable person, in relation to any period consisting of one taxable period or of two or more consecutive taxable periods, was greater than the total amount of tax (if any) paid by him in relation to that period, then, without prejudice to any other action which may be taken, they may, in accordance with regulations but subject to section 30, make an estimate in one sum of the total amount of tax which in their opinion should have been paid in respect of the taxable period or periods comprised in such period and may serve a notice on the person specifying—

(a) the total amount of tax so estimated,

b) the total amount of tax (if any) paid by the person in relation to the said period, and

(c) the balance of tax remaining unpaid.

High Court

Vieira argued, among other things, that O’Brien had failed to give adequate consideration to its submissions supporting the legitimacy of the self-supply scheme; therefore Revenue did not have “reason to believe” that it had an additional tax liability and did not have authority under s 23(1) to perform the assessment.

Revenue argued that the case could be resolved by application of the rule from Halifax: (1) availing of the scheme must provide a tax advantage that is contrary to the Sixth Directive on VAT, and (2) the purpose of using the scheme must be to gain a tax benefit; where both those circumstances exist the national authorities must recalculate the tax liability as if the scheme was not availed of. And although it did consider Vieira’s submissions, Revenue argued that where the test from Halifax was met, it was not required to do so.

The High Court refused Vieira’s request; it appealed that decision.

Supreme Court

Clarke J wrote the judgment for the Court (here). He held that, as most VAT law is introduced to give effect to the State’s obligations under EU law, it must be interpreted in line with EU law. Although there were other issues (such as whether there was one or two assessments and whether notice was served correctly), the Court determined that the main issue for resolution was whether Revenue had “reason to believe” that Vieira had an additional tax liability to authorise an assessment under s 23(1).

Clarke J held that once Revenue believed that the impugned scheme fell foul of the rule from Halifax, that was sufficient in itself to warrant an assessmen under s 23(1). And in the circumstances of this case, he determined that, based on the High Court finding of fact that O’Brien had consulted technical and legal experts within Revenue about Vieira’s scheme and the Halifex rule, he had sufficient reason to believe that Vieira had an additional tax liability and to perform an assessment of that liability.

MacMenamin J and Dunne J concurred.

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