Vol. 561 No. 4
264 Ms Shortall asked the Minister for Finance the position regarding the imposition of the increase in VAT in relation to new houses; the exact date when the new rate became applicable; if the purchaser is liable for the increase if contracts were signed and deposits put down before 1 January 2003 but where the transaction is to be completed after that date; and if he will make a statement on the matter. [4776/03]
The reduced rate of VAT increased from 12.5% to 13.5% with effect from 1 January 2003. As regards the impact of the change in the rate on new housing, generally the purchase of a house involves two stages, namely, the payment of a deposit at the time of signing the contract, with the possibility of staged payments as the house is being constructed and payment of the balance on completion. Where a payment is received from a private individual and any other person not registered for VAT, the rate of VAT applicable is the rate in force at the time the payment is received. Therefore, any payment made during 2002 was liable at the 12.5% rate, and payments made during 2003 are liable at the 13.5% rate.
Thus, in cases where deposits and-or staged payments were made prior to 1 January 2003, it is on the remaining balance that the increased rate is applied. In cases where contracts are signed, but no payments made prior to 1 January 2003, the total cost of construction of the house is subject to VAT at 13.5%.
