Under European law, taxpayers are unable to appeal to the the European Court of Justice (ECJ) directly. The ECJ only responds to “questions” asked by national courts (these can be either supreme courts or lower courts).

PWC UK took a long shot and nudged a UK court to refer a question relating to input tax credit to the ECJ. Their point was that the current UK law stating that VAT on “business entertainment” expenses is not recoverable is illegal. The 6th Directive (nowadays called VAT Directive) slightly changed the a small part input tax credit rules on August 1, 1988, and the UK has been caught with improperly implementing this change. This is the so-called Danfoss case (C37-07) in 2008.

PWC basically said that the partially incorrectly implemented rule on reclaiming VAT on business entertainment nullified the entire input tax block on these expenses.

PWC only wanted the UK court to refer the question to the ECJ, in order to get the ECJ to clarify what the EU VAT rules were. But the judge in the first-tier tribunal court was not swayed by PWC’s argument and rejected the request. PWC can still appeal.

Even if you are not into UK VAT, I still recommend this document because it is a clearly written decision tree, and provides lots of considerations and references to other court cases.

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