Factual and Procedural Background
Applicant, a UK-headquartered sports retailer, sold goods online to customers in Ireland and accounted for VAT in the UK under an arrangement involving separate delivery companies. The Irish Revenue Authority questioned whether the supplies were subject to Irish VAT under the distance-selling rules. [1][2][3]
The UK Tax Authority initially accepted Applicant’s position, but later developments, including the CJEU judgment in KrakVet, led Applicant to obtain refunds of UK VAT paid on sales to Irish customers. Information exchanged between the tax authorities indicated that approximately £7 million of relevant sales had occurred between November 2010 and April 2013 and that approximately £1.1 million in UK VAT had been refunded. [4][5][6]
The Irish Revenue Authority had previously raised assessments for later periods, but Applicant withdrew its appeal against the assessments relating to 2013–2015. The Irish Revenue Authority subsequently notified Applicant of a Level 2 VAT audit concerning the period from 1 November 2010 to 30 April 2013. [7][8][9][10]
Applicant commenced judicial review proceedings seeking certiorari of the decision to commence the audit. Leave was granted, and the Irish Revenue Authority undertook not to proceed with the audit pending resolution of the application. [11]
Legal Issues Presented
- Whether the judicial review application was premature because no VAT estimate or assessment had yet been issued. [12][13]
- Whether Applicant could challenge the audit on the basis that any later VAT estimate or assessment would be outside the four-year limitation period, absent the “fraud or neglect” exception in section 113(2) of the relevant VAT legislation. [14][15][16][17]
- Whether an adequate alternative remedy existed through an appeal against any future VAT estimate or assessment. [18][19][20]
Arguments of the Parties
Applicant’s Arguments
- The application was maintainable because there was no statutory appeal against the decision to commence a VAT audit. [21][22]
- The audit should be restrained because any resulting assessment might be time-barred unless the “fraud or neglect” exception applied, and Applicant contended that the exception could not lawfully apply. [23][17]
- Applicant relied on Google and distinguished Rowland, arguing that judicial review was available at the commencement of the process. [21]
- Applicant also raised arguments based on the rule in Henderson v Henderson and legitimate expectation, although neither ground had been included in the leave granted. [24][25][18]
Respondent’s Arguments
- The application was premature because the audit had not produced any VAT estimate or assessment and had not altered Applicant’s legal rights. [13][26]
- There was no basis to conclude that a future assessment could not fall within the statutory “fraud or neglect” exception or that the exception was inconsistent with EU law. [27]
- Any challenge should be brought through the statutory appeal process following a VAT estimate or assessment. [18]
- Rowland governed the case, while Google was distinguishable. [28]
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Halifax | EU law prohibition on abusive arrangements. | Discussed in the background concerning the interpretation of distance-selling provisions. [29] |
| Part Service | EU law abuse-of-rights principles. | Referred to in the VAT Committee’s analysis. [29] |
| KrakVet Marek Batko sp. k. | Interpretation of whether goods are transported “by or on behalf of” a supplier and whether arrangements are abusive. | The judgment was treated as materially relevant to the VAT treatment of Applicant’s sales. [4] |
| Rowland v An Post | Courts should generally await completion of an ongoing process unless it has gone irremediably wrong and cannot be corrected. | The Court held that Applicant’s case was not based on an ongoing process having gone irremediably wrong. [30][31] |
| Murphy v Commissioner of An Garda Síochána | The Rowland principles apply to judicial review proceedings. | The Court applied the broader prematurity principles rather than the narrower fair-procedures exception. [32][33] |
| Habte v Minister for Justice and Equality | Judicial review of a proposed or preliminary decision may be premature where the factual context is undeveloped. | The Court relied on Habte in identifying a discretion to refuse premature review. [34][35][36] |
| Google Ireland Ltd v Data Protection Commissioner | A decision commencing an inquiry may be reviewable where it is allegedly ultra vires. | Distinguished because the alleged legal defect here concerned a hypothetical future assessment, not the audit itself. [37][38][39] |
| Ivers v Garda Commissioner | Commencement of a statutory procedure may be quashed where it is ultra vires. | Used as a further example of reviewable commencement decisions, but not applicable to Applicant’s futility argument. [38] |
| Borges v Fitness to Practice Committee of the Medical Council | Interlocutory decisions during inquiry processes may be reviewable. | Referred to in the discussion of reviewability of preliminary decisions. [40] |
| Byrne v Minister for Defence | Judicial review should generally be refused where an adequate alternative remedy exists. | Supported the Court’s discussion of the discretion to refuse relief. [41] |
| EMI Records (Ireland) Ltd. v Data Protection Commissioner | Exceptions to the requirement to exhaust an alternative remedy are exceptional. | Reinforced the general preference for using the statutory process. [42] |
| Stefan v Minister for Justice | Judicial review may be appropriate where an appeal would not cure procedural unfairness. | Identified as an exception, not relied upon as applicable to Applicant’s case. [43] |
| Leng v Minister for Justice | Judicial review may be available where a jurisdictional issue arises. | The Court noted that Applicant was not challenging the Revenue Authority’s jurisdiction to audit. [43][16] |
| Tomlinson v Criminal Injuries Compensation Tribunal | Review may be appropriate where there is a net issue of law or unfairness in requiring use of the statutory scheme. | Considered as part of the alternative-remedy principles. [43] |
| Nova Colour Graphic Supplies Ltd. v Employment Appeals Tribunal | The case for exhausting an alternative remedy is particularly strong where factual assessment is required. | Supported refusal of review before the factual position had developed. [43] |
| Henderson v Henderson | Parties should generally bring forward their whole case in existing litigation. | The Court did not determine the argument because it had not been included in the grounds for which leave was granted. [24][44] |
| Lee v Revenue Commissioners | Limits on the jurisdiction of tax appeal bodies to issues relevant to the statutory tax charge. | Raised uncertainty about whether a future VAT appeal could determine the legality of relying on the limitation exception. [45][46] |
| Stanley v Revenue Commissioners | A tax appeal body may lack jurisdiction to determine whether an assessment itself was lawfully issued outside a limitation period. | The Court noted that the VAT legislation contained no equivalent express appeal provision and left the issue undecided. [47][48][20] |
| R v Inland Revenue Commissioners, ex parte Bishopp | Courts generally avoid reviewing claims based on hypothetical facts or events that may never occur. | Applied by analogy to conclude that Applicant’s challenge lacked a developed factual context. [49][50][51] |
| Facebook Ireland Ltd v Data Protection Commissioner | Commencement of an inquiry can have legal consequences and may therefore be reviewable. | Distinguished because the alleged defect in the present case related to a possible future assessment. [52][39] |
Court's Reasoning and Analysis
The Court accepted that a VAT audit notification can have legal consequences because Revenue officers may exercise statutory powers to require documents and information. Accordingly, the audit decision was capable of being subject to judicial review in an appropriate case. [52][53]
However, Applicant’s alleged legal defect did not attach to the audit. It concerned a VAT estimate or assessment that might or might not be issued after the audit and the possible application of the statutory “fraud or neglect” exception. [54][39]
The Court held that the application depended on several unresolved matters: the audit’s outcome, whether an estimate or assessment would issue, its amount and legal basis, the evidence relied upon, and whether any appeal would lie to the Appeal Commissioners. These uncertainties meant that there was no properly developed factual context in which the Court could determine the issues. [55][56]
The Court rejected the argument that Applicant would acquiesce in any later unlawful assessment by failing to challenge the audit. The audit itself was not alleged to be unlawful, and the later legality of any assessment could not be determined merely by challenging the audit in advance. [39][57]
The Court also rejected Applicant’s comparison with a person facing an imminent criminal trial. Applicant was instead seeking to halt an investigation by relying on arguments that might arise only if a later charge or assessment were issued. [58][59]
Because the application was premature, the Court considered it undesirable and practically difficult to decide the substantive limitation and EU-law questions before the relevant events had occurred. [60][51]
Holding and Implications
THE JUDICIAL REVIEW APPLICATION WAS REFUSED AS PREMATURE. The Court held that no properly developed factual context existed for deciding whether a future VAT estimate or assessment could rely on the “fraud or neglect” exception. [61][56][62]
The judgment did not finally determine the legality of any future VAT estimate or assessment, the operation of section 113(2), or the availability of an appeal against reliance on that exception. The parties were directed to agree the form of final order and costs, failing which written submissions would be required. [20][63]
The decision’s direct effect was to refuse Applicant’s attempt to stop the proposed audit at that stage. The Court did not decide the substantive VAT issues or establish a new substantive precedent on them. [39][51]