Banner

Perspectives

Finance (No.2) Bill 2013

Indirect tax

Pascal Brennan, Partner, Deloitte.

The retention of the 9% VAT rate for the hospitality sector remains the highlight of the Budget measures. Interestingly, the Finance Bill removed the original expiry date of the relief which was 31 December 2013 and did not replace it with another. Does this indicate that the Government sees this as a measure which is here to stay? If so, this would be welcome news for all in the industry.

On a less positive note, it is proposed to claw back VAT input deductions from businesses which do not pay their suppliers for the goods or services for which they were invoiced within 6 months. At first blush this change seems minor and even beneficial to businesses. There is now an incentive to creditors to pay within 6 months or suffer a claw back of VAT on the unpaid invoice. On the other hand however, businesses are now required to monitor their accounts payable processes and adjust their VAT input deduction if they don’t pay within 6 months. It is important to note that ultimately, if payment is made subsequently, the VAT adjustment can be reversed.

From a wider policy perspective, the VAT input change in the Finance Bill is actually the continuation of an unwelcome trend whereby the State, through a series of similar tax measures, is actually putting itself in a position to take an ever greater preferential share of the assets of distressed businesses. The measure will place a further tax liability on the distressed business itself which will then often have to be settled as preferential debt by a liquidator or receiver. This in turn reduces the money available to unsecured creditors. This approach must surely be questionable in circumstances where the State is actually in a far better position to bear a loss than the vast majority of businesses, some of whom may even be put out of business by virtue of bad debts. Perhaps there should be some debate about this matter.

Pascal Brennan

Pascal Brennan

Pascal Brennan

Partner - Tax

Pascal is a partner and national leader of the ind...More

People

Pascal Brennan

Partner - Tax

Submit RFP

Submit via our online form

Contact us

Dublin 2 Change location

Our three Dublin offices are:

Earlsfort Terrace, Hatch Street & Hardwicke House

Dublin 2

Ireland

Phone: +353 1 417 2200

Fax: +353 1 417 2300

Email: info@deloitte.ie