The position is that the VAT regime generally and the rate of tax applying to the supply of goods and services are subject to the requirements of EU VAT law with which Irish VAT law must comply.
I am advised by the Revenue Commissioners that the rate at which Irish VAT is charged on the supply of buildings and on the service of carrying out home improvements is generally the reduced rate of 13.5%, while the VAT rate on the supply of materials used in buildings and in home improvements is normally the standard rate of 21%. When VAT is charged to persons who are registered for VAT, those persons are entitled to reclaim that VAT subject to the normal rules. However, when VAT is charged to persons acting in a private and personal capacity, those persons are not entitled to reclaim it.
Accordingly, VAT cannot be refunded to private persons constructing one-off buildings or doing home improvements. An exception is made, however, in the case of certain goods supplied to disabled persons. The Value-Added (Refund of Tax) Order 1981, SI No. 428 of 1981, enables VAT on qualifying goods to be refunded where the goods are purchased for the exclusive use of disabled persons suffering a specified degree of disablement. Building constructed or adapted exclusively for use by disabled persons may qualify for a VAT refund. Refunds are dealt with on a case by case basis by the Revenue Commissioners depending on the circumstances of the goods and the disability of the person concerned.
I would also point out that a scheme of disabled persons grants is operated by local authorities with capital provision from the Department of the Environment, Heritage and Local Government. These grants are designed to meet the needs of persons who are either physically handicapped or are suffering from severe mental illness. Where a new dwelling is being bought or built a maximum grant of €12,700 is payable. In the case of adaptation of an existing dwelling, 95% of the approved cost of the works is available up to an effective maximum grant of €30,000. Full details of the scheme and the conditions applicable are available from the local authority in whose area the dwelling is situated.
In so far as a comparison with the position in Northern Ireland is concerned, the position is that in Northern Ireland and in the UK generally the rate at which VAT is charged on the supply of a building designed as a dwelling is the rate of 0%, while the VAT rate on the renovation or alteration of qualifying residential premises is generally the UK reduced VAT rate, which is 5%. Furthermore, when certain building services are supplied to disabled persons VAT can be charged at the rate of 0%.
Under the EU VAT Directive a Member State may retain a 0% rate and a reduced rate of VAT on supplies of goods and services where those rates applied on 1 January 1991. However, Member States cannot now extend a 0% rate to supplies of other goods and services, and can only extend the reduced rate to supplies of goods and services where this is specifically allowed for in the VAT Directive. Accordingly, I am not in a position to extend the 0% rate of VAT to the ‘one-off building' of homes or on small home improvements.