I move amendment No. 23:
In page 13, line 36, to delete " him." and to substitute the following:
" him, and
(f) tax charged to him during the period by means of invoices prepared in the manner prescribed by regulations and issued to him in accordance with section 12A.".
I move amendment No. 24:
In page 13, line 51, after " vehicles " to insert " or for use, in a driving school business, for giving driving instruction ".
This amendment enables passenger vehicles purchased by taxable persons for use in a driving school to qualify for relief. The general exemption from tax hitherto enjoyed by driving schools in respect of tuition fees is no longer permissible under the directive and, car driving tuition fees will become liable to tax since they are outside the scope of the new definition for educational services contained in section 19 of the Bill.
The proposed relief in respect of vehicles is in contrast with the general prohibition of VAT relief in respect of the purchase of passenger vehicles except as stock-in-trade or for hiring, but it acknowledges the substantial input element in the provision of driving tuition. The relief will be subject to the normal conditions regarding exclusion of relief for usage for any purpose other than the taxable activities of the taxable person.
Is this not tied up in the general section?
This is a change brought about by the EEC directive. Driving tuition fees will now become liable for tax and they have not heretofore been liable. That is required by the directive. On the other hand, the relief in respect of the purchase of a vehicle confined to the use made of it for the purpose of tuition is new and has a counter-balancing effect.
Is this a major change in allowing VAT on passenger vehicles? Up to now, no one, irrespective of what use his car was put to, whether in a driving school or not, was allowed VAT on this. This is a major change. I am sure the Minister will come under pressure in future years to allow other businesses to claim VAT relief on their passenger vehicles. Can he envisage a situation arising where he might consent to giving it to people, say, buying company cars, exclusively for their sales representatives?
I do not visualise situations in which the relief should be extended further. It is already in existence and will continue in existence in respect of car hire firms where it is clearly and directly related to their business. It is being introduced here on an analogous basis but only as counter-balancing the new liability being imposed.
Am I to take it that the fees charged for driving lessons are not taxed at present but will be taxed in future?
That is correct.
And that cars purchased for that purpose will be taxed in future?
They were not taxed before.
They were not taxed before but will be taxed now.
That is not quite accurate. It is correct to say that the fees were not liable to tax and will now be liable to tax. The cars were liable to tax but the tax was not relieved or recoverable. Under this arrangement they will continue to be liable to tax but that tax will be recoverable in so far as it relates to the use of the car for tuition.
Then there is no conflict. Deputy McCreevy referred to other cases but there would be few cases similar to that.
I agree with Deputy Callanan.
Will the dispensation under the new arrangement apply to vehicles used by such companies as CIE for the purpose of training drivers? One could assume a similar situation arising in the case of Army vehicles. What is the criterion for this purpose?
Both CIE and the Army would be outside it. I did say that the relief would be restricted to the use of the vehicle for tuition. I said that because I would not like anybody to get the idea that a loophole is being created. The Revenue Commissioners will not be operating this in such a way as to facilitate avoidance of liability for VAT. They will want to be satisfied that the vehicles are being used substantially for the purpose of driving tuition.
There are many people giving driving lessons in my constituency. Most of them are using their own cars and are in business in a small way. If the Revenue Commissioners decide that their fees are liable to VAT, are they going to allow for VAT on the purchase of their cars?
In such cases I would imagine that the kinds of returns of profits shown for income tax purposes could also be relevant.
Under present regulations garages are not supposed to show VAT as a separate entry on their invoices. If the owner of a driving school buys a car, how are the suppliers of such cars to show the sale?
The garage is entitled to show the VAT separately, but the VAT-inclusive price must be quoted to the public. They are entitled to show the VAT separately on the invoice.
I was thinking of the possibility of having a novel threshold in which the VAT exemption would be limited to driving schools, depending on the percentage of their clients who pass driving tests.
Take the case of a man who sets up a driving school and has one car. If he pays £4,000 for that car is he liable for 20 per cent VAT—£800 on the purchase price? If he gives lessons for 40 hours per week at £3 per lesson on which he pays 10 per cent, that is £6,000 per year at £600, he is liable for £600 but he is going to get relief of £800.
The provisions in relation to VAT on cars are special and we will be dealing with certain changes in that on a later section. Even as the position is at present, there is a kind of built-in tax plus the ordinary 10 per cent rate. The relief given would only be in respect of the 10 per cent, not in respect of the total VAT on the car.
Is there a portion of that tax on the manufacturing of the car and another portion on the retail sale of the car?
We will be dealing with a certain change in that structure but the effect will be the same. It will still be a 10 per cent relief in so far as it is given.
Amendments Nos. 25, 41, and 42 are related and may be discussed together.
I move amendment No. 25:
In page 14, to delete lines 2 to 5, and to substitute the following:
" in-trade, or
(v) goods or services used by the taxable person for the purposes of an exempted activity (whether carried on in the State or elsewhere) or for purposes other than those of his business,
but subparagraph (v) shall not operate to prevent a deduction of tax if, and to the extent that, the tax relates to goods and services used for the purposes of any of the following activities:
(I) transport outside the State of passengers and their accompanying baggage,
(II) services specified in paragraph (i), (xi) or (xii) of the First Schedule, and agency services in regard thereto, supplied outside the Community, and
(III) insurance services and the provision of credit, and agency services in regard thereto, directly in connection with the export of goods to a place outside the Community.".
This amendment clarifies the position regarding the extent to which relief of input VAT is allowable in relation to exempted activities when they are carried on outside the State. It specifies that, in general, no relief is allowable in respect of exempted activities wherever carried on. As an exception, relief is allowable on (1) passenger transport carried on anywhere outside the State; (2) on certain services when supplied outside the EEC. The amendment makes no effective change in respect of foreign passenger transport but it introduces a new relief in respect of the following services when supplied outside the EEC: (1) supply of stocks, shares or other securities; (2) banking and insurance services; (3) lending money or affording credit otherwise than by means of hire purchase or credit sale transactions; (4) agency services in regard to these services. The services in question will be deemed to be supplied outside the Community when they are performed for a client established outside the Community having no establishment in this country or, if he has no establishment, that his permanent address is outside the Community. This is on foot of Articles 9 and 17/3(c) of the Directive.
What is the extent of the availing of this provision?
I would think very little. I understand that the provision is primarily to cover foreign business in insurance and banking carried on in the UK. As far as we are concerned it will have very little impact.
I move amendment No. 26:
In page 14, before section 11, to insert the following section:
The following section shall be inserted after section 12 of the Principal Act:
‘12A (1) Where a flat-rate farmer supplies agricultural produce or an agricultural service to a person, the farmer shall, subject to section 17 (2), issue to the person an invoice indicating the consideration (exclusive of the flat-rate addition) in respect of the supply and an amount (in this Act referred to as " a flat-rate addition ") equal to 1 per cent. of the said consideration (exclusive of the said addition), and the person shall, if he is a taxable person, be entitled to treat the flat-rate addition as tax deductible under section 12 subject, however, to any restrictions imposed by or under subsection (3) or (4) of that section.
(2) In this Act "flat-rate farmer" means a farmer who is not a taxable person.'.".
