Dáil Éireann Debate, Thursday - 14 June 2018
62. Deputy John Brassil asked the Minister for Finance the reason VAT will no longer be reclaimable at purchase on classification N1 vehicles; if this will be reconsidered; and if he will make a statement on the matter. [25995/18]
Amharc ar fhreagra63. Deputy John Brassil asked the Minister for Finance the reason VRT is increasing on classification N1 vehicles; if the decision will be reconsidered; and if he will make a statement on the matter. [25996/18]
Amharc ar fhreagraI propose to take Questions Nos. 62 and 63 together.
I am informed by Revenue that section 130 of the Finance Act 1992, as amended by section 53 of the Finance Act 2017, provides that EU category N1 vehicles with 4 or more seats and to which a BE Bodyworks code has not been assigned will be included in the Category A rate from 31 July 2018. Those N1s with 4 seats or more and which have the passenger and cargo compartments completely separate will remain as Category B vehicles. This will ensure that genuine commercial vehicles continue to benefit from the lower rate of 13.3% VRT.
The EU N1 category incorporates certain vehicles that by design facilitate use for non-commercial purposes (specifically those with 4 or more seats) and that were, over time, increasingly being bought and used for purposes that were clearly not commercial. The tax advantages attached to these vehicles spurred sales volumes, creating distortions to the market and resulting in loss of revenues to the State. I am satisfied that the change in the legislation addresses this issue by providing for definitions of VRT categories A and B that accord with the design and functionality of both non-commercial and commercial vehicles.
I am further advised by Revenue that there are no VAT implications in relation to the VRT changes from 31 July 2018 and the normal VAT rules will continue to apply to the purchase of N1 vehicles.
The VAT Consolidation Act, 2010 provides that an accountable person is entitled, subject to the normal deductibility rules, to deduct the VAT incurred in respect of the purchase of certain business vehicles. Vehicles, such as vans, lorries, pick-ups and crew-cabs are often referred to as commercial vehicles for VAT purposes; they are used exclusively for business purposes which entitles the business to claim a full refund of the VAT incurred on the purchase. Vehicles, such as cars, are mainly used for private purposes and there is no right to deductibility. However, where a car is being used for at least 60% business purposes VAT legislation provides for a VAT refund of the VAT incurred on the purchase (to a maximum of 20%), if the car is registered for VRT purposes on or after 1 January 2009 and has a level of CO2 emissions of less than 156g/km.
