To ask the Minister for Finance if consideration will be given to the introduction of a special reduced VAT rate for housing repair, maintenance and improvement work carried out as suggested by Chambers Ireland..
– Seán Kyne.
Minister for Finance ( Mr Noonan) : I would point out that a reduced rate of VAT (13.5%) already applies to the supply of housing repair, maintenance and improvement work on residential properties.
In order to apply a lower reduced VAT rate to these services, the only rate possible would be the 9% VAT rate. While EU VAT law provides that a VAT rate of 5% or more may be applied to the supply of construction services on residential dwellings, the EU VAT Directive also provides that Member States may only apply up to two reduced rates of VAT and Ireland already operates reduced VAT rates of 9% and 13.5%. In this context, in order to apply a rate of 5% to the supply of such construction services, all activity at the 9% rate would have to be applied at the 5% rate and such a move would be excessively costly to the Exchequer.
Furthermore, while it is possible under EU VAT law to apply the 9% VAT rate to the supply of construction services on residential dwellings, it is not possible to apply this rate to construction services on non-residential property. This is because the application of the 13.5% rate to these services in Ireland is part of a derogation under the EU VAT Directive, which provides that as Ireland applied a reduced rate to such construction services on 1 January 1991, we are entitled to retain this historic treatment, provided the rate is charged at 12% or more. This would mean that if housing repair, maintenance and improvements was applied at the 9% VAT rate, this would involve two separate rates applying to the same services depending on the type of dwelling concerned, which would be complicated to administer.