The rates applicable for VAT in 2005 are:
- Standard Rate of VAT is 21%
- Low Rate of VAT is 13.5%.
- Zero Rate of VAT.
- flat rate (farmers) VAT is 4.8%, 5.2% from 1st January 2007.
VAT Registration Thresholds
The VAT registration thresholds for small businesses are being increased from €27,500 to €35,000 in the case of services, and from €55,000 to €70,000 in the case of goods. These increases will take effect from 1 March 2007. This will reduce the administrative burden for small businesses and the Revenue authorities.
VAT Cash Accounting Threshold
The annual VAT cash accounting threshold for small firms is being increased from €635,000 to €1,000,000 with effect from 1 March 2007. This will simplify administration and reduce working capital requirements.
Less Frequent VAT Returns for Small Businesses
The frequency of VAT payments, currently six per year, for smaller businesses is being reduced with effect from July 2007. For businesses with a yearly liability of €3,000 or less, the option of filing returns on a half-yearly basis will be available.
For businesses with a yearly liability between €3,001 and €14,400, the option of filing returns every four months will be available. This will reduce compliance costs for the firms in question.
VAT Relief for Conferences
A specific measure which will allow deductibility of VAT on conference-related accommodation expenses will be introduced during 2007. Full details of the measure will be set out in the Finance Bill.
Reduction of VAT rate on Child Car Seats
The VAT rate on child car seats will be reduced from 21% to 13.5% with effect from 1 May 2007.
No Loss of revenue provisions
We would like to remind you that The Revenue Commissioners no longer accept any excuses for VAT not being charged on the provision of vatable goods or services, regardless of the VAT status of the customer to whom they have been provided.
In this regard, particular attention should be paid to inter-group company charges, in the absence of a VAT group. In any instances in which VAT has erroneously not been charged, the taxable person responsible will be held liable for any VAT chargeable from the date on which it was chargeable. It should be noted that this type of situation would also give rise to the imposition of interest and penalties by the Revenue.
Currency Denomination on VAT Documents
VAT registered entities are obliged to show the amount chargeable on any invoices, credit notes etc. issued by them in the denomination of the currency of the state. The appropriate symbol pertaining to the denomination being used should also be shown.
VAT Refunds
Clients should note that the repayment of any VAT refunds due to them will be delayed until such time as they have provided the following information to that office: -
a) Name and address of Bank/Building Society.
b) The branch sort code of the Bank or Building Society.
c) Details of the Bank/Building Society account number.
Refunds of VAT to Disabled Persons
A refund of VAT on the import, acquisition, purchase or conversion of motor vehicles specially for the disabled may be obtained under certain conditions. The following conditions apply:
- The vehicle must be specially adapted to take account of the persons disability.
- The vehicles must be purchased and registered in that person's name.
- The vehicle must be fitted with an engine whose capacity is not greater than 2000 c.c.
- The person's disability must be certified by the appropriate Director of Community Care and Medical Officer of Health or by Disabled Drivers Medical Board of Appeal.
- If the vehicle is disposed of within 2 years a portion of the VAT refund will be repayable to the Revenue.
The total VAT or VRT which will be repaid to the disabled person cannot exceed €9,523 in respect of any vehicle. Similarly, refunds of VAT or VRT are available to disabled passengers and to certain qualifying organizations. The maximum refund in these instances is €15,872.
N.B.
This summary should not be treated as advice or a recommendation. For your particular situation, please consult us, privately, or your own professional advisor for specific in depth advice.
Farming
Farmers current receive VAT at the rate of 4.8%, 5.2% from 1st January 2007.
The are not obliged to register and, if they are not registered can make a special claim for VAT refunds in respect of building work.
If farmers register for VAT they receive the same treatment as other VAT registered parties.
Valuation of Leases for Valued Added Tax Purposes
When a long-term lease (i.e. lease for 10 years or more) is being
created in respect of a developed property, any VAT chargeable is based on the capitalized value of the lease. When valuing this interest, the Revenue Commissioners permit the use of any of the following three methods, although method a) must be used, if the lease agreement provides for a rent review within the first five years of its term:
a) Valuation by a Competent Valuer (i.e. Estate Agent etc.)
b) By multiplying three-quarters of the annual rent by the number of
complete years in the term of the lease (ignoring break clauses)
c) The amount of the most recently issued national loan stock (which
matures no earlier than five years from the date of issue) necessary to give an income equal to the annual rent.
As the annual redemption yield on this stock has been reduced to 4.26 with effect from 7th May 1999, the amount of the multiplier (i.e. 100 divided by the redemption yield) has increased to 23.47 from that date. Therefore the calculation of the capitalized value of any new leases created after 7th May 1999 using method c) (i.e. "the Multiplier Method") should be calculated by multiplying the annual rent by 23.47.
It should be noted that any premium payable by the tenant to the
landlord for the lease is added to the value at arrived in (b) and (c)
above whereas any premium payable as an inducement by the landlord to the tenant is deducted when ascertaining the capitalized value of the lease. Following on from the rate change described in relation to method (c) above, it should be noted that method (a) would generally provide the lowest capitalized value of a leasehold interest with method (b) providing a lower valuation than method (c) for leases of 31 years or less.
VAT on Motor Vehicles
A number of changes in the VAT treatment of secondhand vehicles were introduced with effect from 1 July 1995. These changes arose out of the implementation of the EU Seventh Directive in the Finance Act 1995.
Prior to the introduction of this legislation a motor dealer only had to
account for VAT on the cash difference where he took a trade-in against a sale. This is no longer the case and there are now two separate transactions, the purchase of the customer's car and the sale of the new car which is liable to VAT on the full sale proceeds net of VAT.
As the trade-in is now regarded as a separate purchase, the dealer will be entitled to claim an input credit if he receives a valid VAT invoice from the customer.
Where the original purchaser of the vehicle traded-in was entitled to
reclaim the input VAT on acquisition, he will be in a position to issue
a VAT invoice on the sale of the vehicle to the dealer.
However, in most cases the original purchaser of the vehicle traded-in will not be liable for VAT on the sale and will not therefore be able to issue a VAT invoice e.g. an Office Supplies company trading in the
representative's car. In such cases the vehicle will be a 'qualifying
vehicle' and the dealer will be able to reclaim residual VAT in respect
of the purchase.
Residual VAT being the notional VAT content of the purchase price e.g. trade in price €12,316 notional VAT €2,137. In order to reclaim the notional VAT, the dealer prepares an invoice which the vendor signs confirming that he is not a VAT registered person or that he is a taxable person who is not entitled to claim input VAT on acquisition of the car. When the 'qualifying vehicle' is sold by the motor dealer, the VAT on the sale must be equal to or greater than the notional VAT reclaimed.
Where the VAT on the sale is less, the difference is subject to a claw
back and must be repaid to the Revenue in the VAT period in which the sale occurs.
When a motor vehicle is sold under this arrangement the dealer may not issue a VAT invoice - on this invoice the sale price should make no reference to VAT. This invoice should also be clearly endorsed 'Special Scheme, this invoice does not give the right to an input credit of VAT'. In circumstances where the qualifying vehicle is sold to a VAT registered person and a VAT invoice is issued i.e. the special scheme is not used, a VAT invoice must issue but the motor dealer must not forget to reverse the notional VAT input credit already claimed.
When the business person is purchasing a secondhand vehicle from a motor dealer on which a VAT input can be obtained, it is important to check whether or not the dealer is selling the secondhand vehicle under the special scheme. If the purchase is being made under the special scheme, the VAT registered business person would not be entitled to a VAT input e.g. a greengrocer purchasing a secondhand van under the special scheme would not be entitled to a VAT input so special care should be taken when negotiating the price with the motor dealer.
Therefore, motor dealers should not forget that light commercial
vehicles and car derived vans can be either qualifying vehicles or non qualifying vehicles and for good business relations and future business one should ensure that the purchaser is fully aware of whether or not he is entitled to recover VAT on the purchase.
VAT Deadlines
Bi-Monthly VAT Returns by the 19th of the month following each taxable bi-monthly period
Return of Trading Details (Form VAT3 G(A)) due by 19th of the month
following your VAT accounting year end
Refunds of VAT to Coach Operators
The Value Added Tax (Refund of Tax) (No. 28) order which came into
effect on the 23 January 1996 provides for a full repayment of VAT to
exempt coach operators subject to certain conditions in respect of the tax paid on the acquisition or leasing of touring coaches of certain age and dimensions. The following conditions apply:
The operator should be engaged in the business of the carriage of
tourists by road under contract for group transport.
The operator must have complied with all his tax obligations.-
The vehicle can be either single deck or double deck with certain
dimensions as specified in the Order and not more than two years old. The operator must complete and submit a form VAT 71 to the Revenue Commissioners together with the relevant documentation in order to obtain the refund of tax.
