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Candlemaker faces €400,000 VAT bill after losing legal battle over shape of candles

The Tax Appeals Commission rejected an appeal by the candlemaking firm.

Image: Shutterstock/Smileus

A CANDLEMAKER HAS been hit with a VAT bill for almost €400,000 after losing a legal challenge over the shape of candles its supplies to churches.

The Tax Appeals Commission rejected an appeal by the unidentified firm against a VAT assessment totalling €394,802 issued by Revenue for its sales of church candles between 2013 and 2016.

Revenue claimed the VAT Consolidation Act 2010 states that candles and night-lights are only zero-rated for VAT purposes if they are white and cylindrical.

It pointed out that the legislation excludes a zero rate of VAT being applied to candles and night-lights that are “decorated, spiralled, tapered or perfumed”.

As a result, tax officials argued a VAT rate of 23% should apply to all candles that are not white and cylindrical.

The firm of chandlers gave evidence that it had always applied a zero rate of VAT to church candles it sold within Ireland.

The company told the TAC that its church candles were not tapered but were instead “frustoconical and part-cylindrical in shape”.

The TAC heard from a director of the firm that the shape of its candles represented a cone with its top missing.

The company claimed its candles were cylindrical at both ends but just not the same size. It noted the base on the candle was a three-millimetre thick cylinder.

It explained its use of such a shape was to provide “additional fire safety” as the candles were self-extinguishing and contained smoke and environmental protection features which had been patented in Ireland, Europe and Canada.

The firm said Revenue had failed to take into account there was a public interest in having such features in its candles.

It claimed Revenue was acting inconsistently in its classification of church candles which undermined the EU principles of legal certainty and fiscal neutrality.

Under cross-examination, however, the firm’s director admitted he had no correspondence from Revenue stating that church candles attracted a zero VAT rate.

Revenue stated that the legislation governing the VAT rate to be applied to candles was unrelated to their use.

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In her ruling TAC commissioner, Lorna Gallagher, said the VAT Consolidation Act 2010 made no express reference to church candles or the use to which candles were put.

Gallagher said it did, however, specifically state that candles that were tapered attracted the standard VAT rate.

She said the wording of the legislation was “clear and unambiguous”.

Gallagher rejected the firm’s argument that their candles were not tapered as they did not converge at a point.

“For an object to be regarded as tapered, it is not necessary for the object to converge to a point,” she concluded.

It is understood the company requested the TAC to have the ruling reviewed by the High Court by way of the “case stated” legal mechanism.

About the author:

Seán McCárthaigh

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