French case may lead to Irish VAT refunds

Irish tourism and service businesses could stand to reap a tax windfall as a result of a French case going through the European courts.

The case centres on value-added tax (VAT) charged on deposits paid by customers who subsequently fail to show.

A French hydrotherapy company is contesting the issue with domestic tax authorities. The French Supreme Court has referred the case to the European Court of Justice. If the hyrdotherapy group, Société Thermale D'Eugenie-Les-Bains, is successful, large numbers of Irish firms may benefit, according to accountants Deloitte.

The Revenue Commissioners interpret the tax code in the same way as the French and British authorities, which means it considers no show and cancellation fees as chargeable to VAT.

However, if the European Court rules in favour of the French company, the ruling would also apply to Irish businesses in a similar position.

"The case may result in VAT repayments for Irish hotels, car hire companies, restaurants, sports centres and any other business that takes deposits and retains them in the case of no shows," a spokesman for Deloitte said.

However, firms could lose out as a result of time limits imposed by the Revenue for claiming refunds.

Deloitte is advising businesses that have been in receipt of deposits and been charged VAT to lodge a protective claim with the Revenue now "to protect their position".

The case was referred to the European court last month and it could be months or even years before a decision is handed down.

Former finance minister Charlie McCreevy changed the time limits for tax refunds in the 2003 Finance Act. Refunds can now only be claimed for four years following the tax year in which the liability arose.