I have been advised by the Revenue Commissioners that the fees charged by insolvency practitioners, including Personal Insolvency Practitioners (PIPs) are liable to VAT at the standard rate, currently 23%. A PIP will be involved in Debt Settlement Arrangements and Personal Insolvency Arrangements as provided for in the Personal Insolvency Act 2012. It has to be said that a PIP is acting in a capacity not entirely unlike insolvency practitioners, such as, 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.
I understand that the position in the UK is that most insolvency services, such as those of liquidators and receivers, are liable to VAT. However, a VAT exemption is applied to individual voluntary arrangements, company voluntary arrangements, partnership voluntary arrangements and protected trust deeds (applicable only in Scotland). The exemption arises from a decision of a UK First Tier VAT Tribunal based on the facts presented before it rather than a Government decision. I am advised by Revenue that there are distinct differences between the activities undertaken by UK practitioners and Irish PIPs and between UK and Irish VAT legislation. Where a person who is not an official PIP provides services similar to a PIP, such services are also liable to VAT at the standard rate.
