Dáil Éireann debate -
Tuesday, 11 Feb 2003

Vol. 561 No. 1

Written Answers. - House Prices.

Mary Wallace

Question:

222 Ms M. Wallace asked the Minister for Finance if he will consider making changes to assist individuals trying to provide their own home and who purchased a site for ?103,000 and thereby have to hand almost ?20,000 to the Revenue Commissioners due to 6% stamp duty plus 12.5% VAT, whereas a person who owns their own site and builds the identical same house does not have to pay either the 6% stamp duty or the 12.5% VAT; his views on whether this is direct discrimination against a person trying to build their own home who already has the huge cost of purchas ing the site without the additional ?20,000; and if he will make a statement on the matter. [3199/03]

Mary Wallace

Question:

223 Ms M. Wallace asked the Minister for Finance the reason a person who buys a residential site in a residential housing estate in order to build a residence for themselves would have to pay over ?6,000, that is, 6% of the residential site in stamp duty, when the person next door has to pay no stamp duty due to the fact that a developer is building the house next door as distinct from this individual who is struggling to build their own house; his views on whether this is direct discrimination against the person struggling to help themselves by building their own home; and if he will make a statement on the matter. [3200/03]

Minister for Finance (Mr. McCreevy):

I propose to take Questions Nos. 222 and 223 together.

Stamp duty is paid on the transfer of land and other property. As in the case of a person buying a site for the purpose of building his or her home, a person who already owned a site would have faced a stamp duty liability if it was originally transferred to him or her by way of sale. Therefore the treatment in both cases is the same.

If it is the Deputy's contention that such a person is discriminated against compared to a person buying a new house from a property developer, again this is not the case. The developer would, when purchasing the land upon which the house is built, have had a stamp duty liability, and as in the case of other costs, this could be expected to increase the selling price of the house accordingly. To create an exemption from stamp duty in the circumstances outlined by the Deputy would be to discriminate against those who are not in a position to build their own homes.

As regards VAT, the sale of undeveloped land is not subject to VAT, while the sale of developed land is subject to VAT at 13.5%. Development in relation to land means the construction, demolition, extension, alteration or reconstruction of any building on the land or the carrying out of any engineering or other operation in, on, over or under the land to adapt it for materially altered use.

It would be possible for an individual to purchase undeveloped land free of VAT and later develop it, and VAT at 13.5 % would only apply to the construction costs assuming such work was carried out by a contractor. If an individual constructed their own house, then VAT would apply on the materials at the relevant rate. The different VAT treatment of land arises from the fact that it is either developed or undeveloped. It would appear that in this case the purchaser has purchased developed land and that the sale of this land is correctly subject to VAT. There would be no legal basis for relieving the sale of developed land from VAT under either EU or national VAT law.

Given the reasons I have outlined, I do not intend making any changes in this area.