A filling station owner has lost his High Court challenge against a decision of Revenue not to allow him to offset VAT worth over €450,000 because it was linked to fake fuel invoices.

Mr Justice Michael Twomey rejected a case brought by Fergus Byrne, who operates two convenience stores and service stations in Co Offaly, against a ruling by the Tax Appeals Commission (TAC) which had confirmed Revenue's tax assessment.

The court heard Mr Byrne had bought fuel worth approximately €2.5 million from three different companies over a three-year period on which he paid VAT of €451,770.

However, no VAT was ever accounted for by those companies to Revenue in relation to the relevant invoices.

Lawyers for Mr Byrne claimed the TAC had made an error on a point of law in finding that Mr Byrne was not entitled to set off the VAT.

They argued that no reasonable commissioner could have drawn the same conclusion that Mr Byrne should have known about the VAT fraud.

Mr Justice Twomey disagreed because of the cumulative evidence before the TAC including a triangular payment arrangement whereby Mr Byrne received fuel and invoices from one supplier but paid another firm.

The judge noted that Mr Byrne entered into an arrangement that was not normal in an industry which he knew there was a “well-publicised degree of fraud/criminality”.

He observed that Mr Byrne was sufficiently concerned about the diesel he bought to have sent samples for scientific testing to check if it was laundered fuel.

‘Alarm bells’

Mr Justice Twomey said the arrangement “should ring alarm bells” to any business person.

“The alarm bells should be greater when one is dealing with very large sums of money,” the judge added.

Mr Justice Twomey said a reasonable commissioner could reach the conclusion that the only reasonable explanation for the purchases was that they were connected to VAT fraud.

He acknowledged that another commissioner could have reached a different conclusion but stressed that did not mean the TAC in the present case had made an error on a point of law.

The court heard the issue came to light after Mr Byrne, who had been in the service station business since 2000, was subject to an audit by Revenue in April 2013.

Tax officials determined that invoices worth €12,432 in 2010, €190,356 in 2011 and €248,982 in 2012 were fake.

The High Court heard that Mr Byrne had admitted at a TAC hearing that the triangular payment arrangement was “unusual”.

Mr Byrne told the TAC that he accepted without question that it was “just an arrangement between two companies that that’s the way they want their business done”.

He said he had been approached by an agent for one fuel supplier in 2010 who claimed it had an agreement with another company which he knew was linked to one of the country’s largest fuel suppliers, to obtain lower prices.

Up-front payments

Mr Byrne said he believed he would have been required to make up-front payments and would not be able to avail of cheaper fuel if he had ordered fuel directly from the second company.

The businessman said he became sufficiently concerned about the arrangement in 2012 to insist that invoices came from the second company in future.

Mr Byrne said he had only ever dealt with agents and had never contacted either company directly.

However, he disagreed that the triangular payment arrangement, the offer of lower prices and the fact that delivery trucks did not have the livery of the supplier should have alerted him to the fraud taking place.