JHA | Cussens & Others C-251/16: Abuse of Rights

Cussens & Others C-251/16: Abuse of Rights

September 28, 2017


In this case the Advocate General considered the application of the Halifax principle to property transactions. Mr Cussens, together with associates, built holiday homes in Ireland granting initially a long lease of the properties to a related undertaking and then cancelled the lease shortly thereafter. The properties were subsequently sold to third parties. As a result of this arrangement, no VAT was payable on sale. The question was whether these transactions were abusive.

The AG reiterated that the abuse of rights principle required there to be a transaction resulting in a tax advantage that was contrary to the purpose of the relevant provisions and that the essential aim of the transactions was to obtain that tax advantage. In the AG’s view, the transactions in this case, which were designed to artificially create a first taxable supply of the properties, so that more valuable subsequent supplies to third party purchasers were exempt from VAT, did not meet the purpose of the relevant provisions of the Sixth Directive.

The AG also opined that the subjective test, which asks whether the essential aim was to obtain a tax advantage, must be applied restrictively and that the net should not be cast too widely. The test would not be fulfilled if the transactions are found to have some economic justification other than a tax advantage.


This article appears in the JHA September 2017 Tax Newsletter, which also features:

  1. The draft Finance Bill (No.2) – Partial Closure Notices
  2. First ever GAAR Advisory Panel Opinion
  3. Beneficial Ownership Limitations must target only artificial arrangements
  4. The Trustees of the BT Pension Scheme C-628/15: Tax Credits for Exempt Taxpayers
  5. Trustees of the P Panayi Accumulation & Maintenance Settlements: Exit Charge on Trust Migration

You can download the whole newsletter as a PDF: September 2017 – Newsletter