The subjective element alluded to in Emsland Stärke has been refined further by Halifax. According to Pistone, Halifax is regarded as the landmark decision on abuse for value-added tax (VAT) purposes. Among these is the fact the Court defined abuse in this area as a circumvention of tax rules through transactions, essentially driven by tax reasons. Secondly, Halifax also confirmed the previous case law on tax avoidance; it underlined that the existence of objective factors was sufficient for the existence of abusive practices.

5.1.2 “Artificiality” and “purpose”
Halifax concerned a banking company who established call centres for its business. Instead of recovering only 5% of the VAT paid on construction works, Halifax set up a scheme which enabled it to recoup the full amount of VAT incurred through various transactions involving different companies in the Halifax group.

The main issue which needed clarification was essentially: “Has the person performing a transaction constituting supply, the right to deduct the input VAT, where such a transaction on which that right is based has been concluded with the sole purpose of tax avoidance?”

The Court agreed with the Opinion of Advocate General Maduro insofar as the finding of “artificial” in the transactions should not be based on the subjective intentions of those claiming the Community right. Instead, emphasis was placed on the finding that the conduct in question could not possibly have any other purpose than to trigger the provisions of Community law in a manner contrary to their purpose. In addition, the Court also had to consider whether it was apparent from objective factors that obtaining a tax advantage was the essential aim of the transactions. In conclusion, the Court affirmed a less stringent approach towards determining abuse in matters of indirect taxation.

5.2 The concept of abuse in Part Service
In Part Service, the concept of abuse was once more discussed in relation to VAT. The referring court requested guidance on whether or not an abusive practice could be found in a situation when the:

“accrual of a tax advantage is the principal aim of the transaction… or if such finding can only be made if the accrual of that tax advantage constitutes the sole aim pursued, to the exclusion of other economic objectives ”