I have been advised by the Revenue Commissioners that a Personal Insolvency Practitioner (PIP) will be involved in the Debt Settlement Arrangements and Personal Insolvency Arrangements as provided for in the Personal Insolvency Act 2012. The fees charged by a PIP in connection these services are liable to VAT at the standard rate, currently 23% (section 46 Value-Added Tax Consolidation Act 2010). The Revenue Commissioners do not share the Deputy's assessment of the role of a PIP since they consider a PIP to be acting in a capacity not entirely unlike liquidators, receivers or examiners whose services are also subject to VAT at the standard rate.
Having regard to the activities carried out by a PIP, Revenue has formed the opinion that the service provided by a PIP is not one that qualifies for exemption in accordance with the VAT Directive, Irish VAT Law, and relevant decisions of the European Court of Justice. It should be noted that exemptions for VAT are to be construed strictly and the activities of PIP practitioners do not fall within the exempted activities outlined under paragraph 6 of Schedule 1 of the Value-Added Tax Consolidation Act 2010.
While particular activities of Insolvency Practitioners operating under the UK Individual Voluntary Arrangement procedure were held by a UK First Tier VAT Tribunal to be exempt from VAT, there are distinct differences between the activities undertaken by UK practitioners and Irish PIPs and between the UK VAT legislation and the Irish VAT legislation.
I would point out that under a Personal Insolvency Arrangement, the Personal Insolvency Practitioner's fees are ultimately deducted from the dividend payments to the creditors under the arrangement rather than charged to the debtor. Therefore, it is the creditor who is bearing the ultimate cost of the fees, including VAT.
