Tuesday, 27 January 2004

Questions (216, 217)

Richard Bruton


332 Mr. R. Bruton asked the Minister for Finance if his attention has been drawn to the fact that pendant alarm systems provided for persons who are incapacitated or in ill-health, are charged to VAT at 21%; if he will consider changing the tax status of these systems which are solely used by elderly incapacitated people, or alternatively making arrangements for refunds to pensioners affected; and if he will make a statement on the matter. [1802/04]

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Written answers (Question to Minister for Finance)

The purchase of a pendant alarm system and its monitoring, are subject to the standard rate of 21%. The installation of such a system, where it includes the purchase of such an alarm, is generally subject to the reduced rate of 13.5%.

The VAT rating of goods and services is largely subject to the requirements of EU VAT law with which Irish VAT law must comply. While we can maintain the zero rating on those goods and services which were zero-rated before 1 January 1991, the purchase, installation or monitoring services for such alarms do not fall within this category. Since we cannot introduce any new zero rate of VAT, we cannot therefore relieve such services as referred to by the Deputy.

I would add that under the Value Added Tax (Refund of Tax)(No. 15) Order 1981, it is possible to obtain a VAT refund in respect of the purchase of a pendant alarm system, as it is considered a medical device for the purpose of this refund order. Applicants should contact the Revenue Commissioners, VAT repayments (unregistered section), Kilrush Road, Ennis, County Clare.

I understand that a scheme of community support for older people is operated by the Department of Community, Rural and Gaeltacht Affairs. The purpose of this scheme is to provide funding for initiatives to improve the security and social support of vulnerable older people. Under the terms of the scheme, grant aid is available towards the once off cost of purchase and installation of small-scale physical security equipment such as strengthening of doors and windows, window locks, door chains and security lighting; and socially-monitored alarm systems, such as pendant alarms, which are operated via the telephone and are worn around the neck or wrist.

Annual monitoring fees or maintenance fees associated with socially-monitored alarm systems are not provided for under the scheme. As these fees are levied by private service providers, I understand that the Department of Community, Rural and Gaeltacht Affairs has no role in setting, abolishing, waiving or reducing such fees.

Jim O'Keeffe


333 Mr. J. O'Keeffe asked the Minister for Finance if he accepts the case made by the Irish Charities Tax Reform Group in relation to the €18 million VAT bill payable by charities on their inputs, which cannot be reclaimed because of their exempted status; if he will consider a mechanism for refund; if he will reduce the minimum donation threshold for tax purposes to €100, and widen the definition of relevant donations to cover gifts of assets as well as cash. [1813/04]

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I should firstly explain that charities and non-profit groups are exempt from VAT under the EU Sixth VAT Directive. This means that they do not charge VAT on their services and cannot recover VAT incurred on goods and services that they purchase. Essentially, only VAT registered businesses which charge VAT are able to recover VAT. I am aware of the recent report commissioned by the Irish Charities Tax Reform Group which indicates that charities incur a VAT bill of €18 million on their inputs.

I have no plans to provide a mechanism for a refund of such VAT. The cost of such a refund would be expensive, especially as there would be pressure to extend such a scheme to charities not represented by the ICTRG and to other non-profit organisations. Indeed, such a system could encourage registration as charities by other organisations to benefit from such funding. In addition, I would point out that Government subventions to affected organisations cover a significant element of the VAT incurred.

As the Deputy may be aware, in the Finance Act 2001, I introduced a new section and schedule into the Taxes Consolidation Act 1997 to provide for a uniform scheme of tax relief for donations which, as well as introducing new reliefs for donations to domestic charities and educational institutions, merged almost all of the existing reliefs under the umbrella of a single scheme. This initiative was widely welcomed by the charitable sector.

Given the very generous nature of the relief, which was only introduced in 2001, as well as the fact that donations can be cumulative, as little as approximately €5 per week over the course of a year, I consider that it would be premature to make any change to the minimum donation threshold of €250 now.

Under existing legislation, donations must be in the form of money in order to attract tax relief. However, where an asset is donated to an eligible charity, the donation for capital gains tax purposes is deemed to be such that neither a gain not a loss accrues to the donor on the disposal. Therefore, no tax charge arises in respect of such a donation and any gain on a subsequent disposal of the asset by the charity shall not be a chargeable gain provided it is for charitable purposes only. Thus, I believe there are already generous reliefs in this area for charities.