The High Court has ordered the Revenue Commissioners to pay interest on VAT repayments - the first time that interest on such tax repayments will be made.
It is thought the ruling could result in a flood of similar claims and add pressure to the Minister for Finance, Mr McCreevy, to examine the issue of paying interest on VAT repayments. This is according to Mr Jim Somers, partner and head of indirect taxes at Ernst & Young, who advised a pension fund and both its trustees at all stages of the appeal.
In the case, Bank of Ireland Trustee Services, acting as a trustee for a pension fund, successfully appealed to the High Court, claiming interest on a VAT repayment that the former trustee of the pension fund, Erin Executor & Trustee Co, was judged entitled to in 1997. The Revenue Commissioners had originally prevented Erin Executor & Trustee Co from reclaiming certain VAT paid.
Tax legislation allows the payment of interest on overpayments of other taxes, but there are no specific provisions in the VAT Acts for payment of interest on repayments of VAT.
Bank of Ireland Trustee Service, which took over from Erin Executor as trustee for the pension fund, formally claimed interest on the total amounts repaid. This claim was rejected by the Revenue Commissioners. The case was then appealed to the High Court.
In the High Court yesterday, Mr Justice Peter Barry ruled in favour of Bank of Ireland Trustee Services that VAT repayments qualify for the payment of interest in the same manner as other taxes.
