I am advised by the Revenue Commissioners that the transport of passengers and their accompanying baggage is exempt from VAT in Ireland under paragraph 14(3) of Schedule 1 to the VAT Consolidation Act 2010. In this respect, services provided by the coach and bus sector are exempt from VAT. This means that a person who provides a bus or coach service does not register for VAT and does not charge VAT on the supply of their services. This also includes the hiring of a bus or coach with a driver. Persons who are exempt from VAT cannot recover VAT on goods and services, such as fuel, tyres and mechanic charges, used for the purposes of the person's coach and bus service.
VAT law in Ireland and the UK must comply with the EU VAT Directive. As passenger transport was exempt in Ireland on 1 January 1978, it is possible under the VAT Directive to continue to apply that exemption. As passenger transport services were charged at the zero rate in the UK on 1 January 1991, the UK are entitled to continue to apply a zero rate to passenger transport services. It is not possible under EU law for Ireland to apply a zero rate to such services as we did not apply a zero rate to them in 1991.
However, I would point out that UK passenger transport operators who establish their businesses in Ireland are subject to the same VAT rules as Irish operators. They are exempt from VAT and not zero-rated, and as such not entitled to deductibility in respect of VAT incurred on items such as fuel. In addition, UK passenger transport operators who are not established in the State are not entitled to any refund of VAT incurred in this State for the purposes of carrying out passenger transport activities, whether that service takes place wholly or partially in the State or whether it takes place wholly outside the State.
EU VAT law also provides that the VAT rate applying to petrol and diesel must be the standard rate, which in Ireland is 23%. It is not possible to apply a lower VAT rate to such supplies.
With regard to the VAT incurred on the purchase of a touring coach, I would point out that while persons who are VAT exempt cannot recover any VAT incurred on goods and services incurred in relation to their business, there is special provision within the VAT code to allow a refund of VAT incurred on the purchase of touring coaches. Under VAT Refund Order S.I. 266 of 2012 coach operators who are exempt from VAT may, subject to the conditions in the Order, be entitled to a refund of the VAT paid on the purchase of touring coaches that are no more than 2 years old and are within specified dimensions.
With regard to your question on duty rebates, any rebate on mineral oil tax under our national law must conform to the EU Energy Tax Directive. Ireland, in common with a number of other Member States, had derogations under this Directive which allowed for specific tax reliefs or rate reductions for fuel used for particular purposes, including school transport services. The European Commission, which is the deciding authority, ruled against an extension of these derogations and the Member States affected, including Ireland, were obliged to withdraw these tax reliefs. Ireland accordingly withdrew the relief that covered bus services, including school buses, with effect from 1 November 2008.
The Energy Tax Directive obliges all Member States to exempt jet fuel used by airlines and fuel used by shipping in Community waters from duty, but does not allow for a similar exemption to be applied to fuel used by road transport operators. The Directive does, however, allow Ireland and other Member States to give a rebate on diesel used by road transport operators and I introduced the Diesel Rebate Scheme last year on that basis. That scheme enables qualifying transport operators to claim a repayment of part of the mineral oil tax paid on auto-diesel purchased in the State for use in qualifying vehicles in the course of business. There is no equivalent scheme in Northern Ireland. The amount of the repayment will vary in accordance with the average price at which auto-diesel is available for purchase in the State during a repayment period, subject to a maximum of 7.5 cent per litre. The rebate rate applicable for the current repayment period is 6.2 cent per litre. In addition to the diesel rebate scheme, it should also be borne in mind that the rate of mineral oil tax on auto-diesel in Ireland is considerably lower than in Northern Ireland; €479.02 per 1,000 litres compared with €695.93 in Northern Ireland at the current exchange rate.
Fuel laundering has been a problem for many years but, with changes in the sulphur content of marked fuel in 2011, it became more viable and criminal gangs intensified their laundering and distribution activities dramatically. Revenue is very aware of the threat that fuel laundering poses to consumers, legitimate business and to the Exchequer and, in response, has made action against fuel laundering one of its priorities. To that end Revenue is implementing a comprehensive strategy to tackle the problem through enhanced supply chain controls, the acquisition of a more effective fuel marker for joint use in the UK and Ireland and continued robust enforcement action. There are severe penalties available to the courts on conviction for a fuel laundering offence. The Courts can impose of fine of up to €126,970 and/or a custodial sentence of up to five years, on a person convicted of an indictable offence relating to fuel laundering. In addition, where the value of the fuel involved in the offence is more that €250,000, a fine of three times the value of the products may be imposed.
Revenue maintains very close working relationships with fuel sector representative bodies to improve the integrity of the distribution system and to challenge those suppliers involved in supplying rogue elements with marked fuel for laundering. The legitimate trade can contribute to closing down the illicit trade by providing information on traders supplying fuel to launderers, outlets that are selling laundered diesel and on persons knowingly using green diesel in road vehicles. Revenue chairs the Hidden Economy Monitoring Group (HEMG) and has established regional sub-groups of the HEMG to facilitate the reporting of information by traders through their representative associations. A person who suspects or has evidence that laundered diesel is being sold in their area should report this through their representative associations to Revenue. Any such reports are treated as confidential and are fully investigated by Revenue.
