18 January 2011

bto was recently successful on behalf of its clients, RBS Deutschland, in a referral to the European Court of Justice.

The opposing party was HM Revenue & Customs (HMRC) and the case called for a hearing in Luxembourg for which bto was required to advise, prepare and attend. Treasury solicitors acted for HMRC and there were appearances at the hearing on behalf of the European Commission, Ireland, Italy and Germany.

Wendy Thomson, Partner, was instructed to oppose an appeal by HMRC to the Inner House of the Court of Session, against the decision of a VAT Tribunal. Wendy advised regarding the case and procedure and instructed a specialist English barrister to appear. The case concerned the question of whether HMRC was entitled to refuse a claim for input tax for the sole reason that the supplies had not actually given rise to a charge to output tax in another Member State of the EU.

The Inner House also asked the ECJ to rule whether the principle prohibiting abusive practices precludes the right to deduct VAT in circumstances where a company in one member state elects to have its subsidiary, based in a different member state, carry out transactions for leasing goods to a third party established in the first member state, in order to avoid a situation where VAT is payable on the consideration for those transactions.

The court ruled that HMRC was not entitled to refuse such a claim and that the principle preventing abusive practices did not preclude bto’s clients’ right to deduct VAT in the circumstances of this case.

Willie Young, bto’s Chairman, said: “We are delighted with the outcome in Wendy’s high profile case and look forward to further successes in the ECJ.”