Ryanair’s attempt to recoup €777,700 in VAT incurred for professional services connected with its unsuccessful takeover of Aer Lingus in 2006 has won the legal backing of the Court of Justice of the EU (CJEU).

However, the airline still needs the imprimatur of the Supreme Court here to progress its case.

Ryanair is appealing a High Court ruling that it cannot claim back the €770,700 VAT incurred on legal and stockbroking fees connected with the transaction.

In determining the airline’s appeal, the Supreme Court referred certain questions on European tax law to the CJEU.

Deloitte’s taxation director, John Stewart, said: “Today’s judgment is a welcome one not just for Ryanair but for all other businesses that incur costs acquiring or taking over companies or attempting to do so as it provides welcome clarity on their entitlement to recover VAT on their costs.”

“To get a positive ruling, where the Revenue Commissioners, the Circuit Court and the High Court have all ruled against Ryanair, a case had to be referred to the CJEU by the Supreme Court,” he said.

“This shows the complexity of the VAT rules that businesses have to grapple with. It also demonstrates that there is an urgent need for the EU Commission to take more action to simplify the VAT rules and thereby reduce the need for cases to be go through the Courts.”

Shortly after Aer Lingus floated on the stock market in 2006, Ryanair surprised the market with an offer to buy its Irish rival for almost €1.5 billion. The approach, and several subsequent efforts, were blocked by the European Commission on competition grounds.

IAG sale

Ryanair eventually sold its near-30 per cent stake in Aer Lingus to airline group IAG in 2015 as part of IAG’s acquisition of Aer Lingus.

Ryanair had appealed the Revenue’s decision on the VAT deduction to the Circuit Court, which ruled against the airline. It then appealed to the High Court.

In 2013, Ms Justice Laffoy of the High Court said Ryanair was clearly not a “taxable person” for the purposes of EU and domestic legislation.

Ryanair then appealed the High Court ruling to the Supreme Court. In its appeal, Ryanair had argued it had provided evidence that it did not intend to hold shares in Aer Lingus as a passive investor, which would have constituted a “non-economic activity” for the purposes of a VAT deduction.