Dáil Éireann Debate, Tuesday - 14 December 2021
226. Deputy Niamh Smyth asked the Minister for Finance if correspondence from a person (details supplied) in relation to VAT in an area will be reviewed; the action his Department is taking to reduce VAT in relation to the matter raised; and if he will make a statement on the matter. [61826/21]
View answerI am advised by Revenue that the VAT rating of goods and services is subject to the requirements of the EU VAT Directive with which Irish VAT law must comply. Under the EU VAT Directive and Irish VAT legislation the supply of building materials is liable to VAT at the standard rate, currently 23%. Member states are not permitted to apply a VAT rate lower than the standard rate to building materials. By way of special derogation from the general rule, however, Ireland is permitted to continue its long-standing practice of applying a reduced rate, currently 13.5%, to the supply of ready-to-pour concrete and certain concrete blocks but there are strict restrictions on this derogation, including that the rate cannot be reduced below 12%.
On the suggestion of a VAT compensation mechanism for purchasers, I am advised by Revenue that this is generally contrary to the operation of VAT. It is for this reason that Ireland has not introduced any new VAT refund orders since the 1980’s and any changes to VAT refunds since then have been either by EU requirement or making minor changes to existing orders.
As a general point of EU law, VAT is a tax on consumption and is applied to supplies being made by a person and not to supplies received by a person. For that reason, it is not permissible to apply different VAT rates to different customers. Therefore, it would not be possible to accept the proposal to apply a different rate of VAT to building materials supplied to particular categories of buyers, such as individual self-builders.
In relation to self-build properties, substantial support is already available through the tax system for first-time buyers, including those self-building their first home. The Help to Buy (HTB) incentive gives a refund of Income Tax and Deposit Interest Retention Tax (DIRT) paid in Ireland over the previous four years, subject to limits outlined in legislation. Section 477C Taxes Consolidation Act 1997 outlines the definitions and conditions that apply to the HTB scheme.
Finally, the Deputy has raised the matter of the VAT rate on new builds in Northern Ireland. When it was within the EU, the UK, by way of special derogation from the general rule, was permitted to continue its long-standing practice of applying a zero rate of VAT to the supply of certain residential buildings.
