Indirect tax (VAT)

As expected following the recent Budget the key VAT change in the Finance Bill is that the VAT rate on electricity and gas will be kept at 9% until 31 October 2024, it was due to revert to 13.5% effective from 1 November 2023.

In line with other announcements in the Budget the Finance Bill also proposes that, effective from 1 January 2024;

• The turnover threshold at which business will have to register for VAT will be increased to €80,000 for supplies of goods (increased from €75,000) and €40,000 for supplies of services (increased from €37,500);
• The rate of payment to non-VAT registered farmers to compensate them for the fact that they cannot recover VAT, known as the flat-rate addition, will be reduced from 5.0% to 4.8%, and
• The 0% rate of VAT will apply to the supply and instal of solar panels for schools and the supply of e-books and audiobooks.

VAT legislation provides that a business can apply to Revenue for a determination, or Revenue could of its own volition, issue a determination of the VAT rate that applies to a particular transaction or whether an activity is exempt from VAT. It is now proposed that this provision will be deleted. In the explanatory notes to the Finance Bill, it is stated that this provision is not used and is no longer considered necessary.

Currently the provision of accommodation is exempt from VAT however, as an exception the letting of a hotel room or a letting to a guest or holidaymaker is liable to VAT. It is proposed that the exception will not apply to lettings of emergency accommodation with the result that all such lettings will be exempt from VAT. This is consistent with the current approach adopted by Revenue. [as stated in the Explanatory Memo]

The Bill also proposes that business will not be liable to account for deposits paid related to bottles and other containers under the soon to be introduced Deposit Return Scheme and that the operator of the scheme will account for VAT on unredeemed deposits.

In relation to excise duty the Bill confirms the Budget changes to provide for the extension of the temporary Mineral Oil Tax rate reductions on auto diesel, petrol and marked gas oil until 31 March 2024 with a phased restoration taking place in two stages on 1 April 2024 and 1 August 2024.

It also extends the Vehicle Registration Tax Relief for Battery Electric Vehicles to 31 December 2025.

Following changes made under the Windsor Framework it is proposed that those consigning certain products to Northern Ireland from Ireland are not obliged to complete the certification set out in section 78B of Finance Act 2003.

It is also proposed to increase the rates of excise duty applicable to cider and perry exceeding 8.5 per cent abv to align with the rates currently applicable to Other Fermented Beverages other than cider and perry at similar strengths.

Although not included in the Bill, since the Minister for Finance’s Budget 2024 speech, in which he announced that the Revenue Commissioners would be shortly launching a public consultation on how Ireland can use digital advances to modernise Ireland’s VAT invoicing and reporting system. That initial consultation was launched on 13 October 2023. This public consultation seeks input from a wide range of stakeholders on their views, concerns and opinions on how Irish VAT reporting can be digitised and what the Irish VAT system should look like going forward. The consultation period will remain open until Friday, 12 January 2024. This presents an opportunity for interested parties to express their views on the approach that you believe Ireland should take.

Our view

The fact that there are limited VAT changes in the Finance Bill is good news for the majority of businesses.

However, it would be disappointing to see that the scope for a business to apply to Revenue in accordance with legislation for a determination concerning the VAT rate that may apply to a transaction or whether or not a transaction was exempt from VAT is being removed. This provision enabled businesses to obtain certainty of the Revenue view on the VAT treatment of transactions. Certainty in matters of taxation, particularly in the area as complex as VAT, is a critical issue for businesses and the withdrawal of the scope to request a determination from Revenue would, in our view, be unnecessary and unwarranted.

In its comments on the Finance Bill the Department of Finance has stated that the legislation allows Revenue to make a determination in relation to VAT while making no reference to the rights of business to apply for a determination. We would ask that the ability of business to request a determination is retained and that the legislation is not deleted in its entirety.

We welcome the continuation, to 31 October 2024, of the 9% VAT rate that currently applies to the supply of electricity and gas and the extension of the 0% VAT rate to e-books, audiobooks and to the supply and instal of solar panels for schools.