Martin Mansergh (Tipperary South, Fianna Fail)

I would first like to set out the context of this relief. Non-profit making organisations and voluntary groups that are engaged in the supply of goods and services closely related to welfare and social security, such as hospitals, are exempt from VAT by virtue of paragraph (vii) of the First Schedule to the Value-Added Tax Act 1972. This exemption from VAT, which applies across all EU member states, means that such organisations or groups do not register for VAT; they do not charge VAT on their supplies of goods and services; and they are not entitled to credit for VAT incurred on goods or services acquired by them. In this regard, where a hospital purchases a good or engages a service, any VAT liable in the charge for that good or service must be borne by the hospital.

However, there is provision within the Irish VAT code for the refund of VAT incurred on the purchase of a new medical instrument or appliance by a person who donates the medical equipment or appliance to a hospital. The Value Added Tax (Refund of Tax) (No. 23) Order 1992 provides that certain conditions must be met in order for a VAT refund to apply: in the first instance, the appliance or instrument must be donated to a hospital; the order applies to any new instrument or appliance, excluding means of transport, which has been designed and manufactured for use solely in medical research or diagnosis, prevention or treatment of an illness; the Minister for Health and Children must recommend that a refund of tax under the order is appropriate, having regard to the requirements of the health services in the State; it is a condition of the order that no part of the funds used to purchase the goods be provided directly or indirectly by the State, a State body or any public or local authority, or indeed by the hospital to which the equipment is donated; and, finally, the amount on which VAT is chargeable must exceed €25,390 in order to qualify. Therefore, individual medical instruments or appliances costing less than €25,390 do not qualify for a VAT refund under the scheme.

The effect of the order is to allow a refund of VAT paid on qualifying medical equipment purchased through voluntary donations. When the refund order was originally introduced in 1987, only partial relief was granted. However, since the order was amended in 1992, the relief applies a full repayment of VAT. In recent years, the number of repayments claimed under the medical donations refund order was 21 in 2007; 13 in 2008; and 22 to date in 2009. The cost of these repayments amounted to €483,000 in 2007; €196,000 in 2008; and €903,000 to date in 2009.

A similar VAT refund order was introduced in 1995 for the repayment of VAT incurred in the donation of any new instrument or appliance to a research institution or a university, school or similar educational body engaged in medical research in a laboratory. Similar conditions are attached to this order, including the minimum value threshold of €25,390. The VAT refund order was introduced to help defray the cost of more expensive items purchased by voluntary donations. Items costing less than the threshold of €25,390 are excluded from the relief in order to limit the relief to more expensive medical equipment.

The current threshold level has not changed in the 22 years since the refund was introduced in 1987 at £20,000, which was translated to €25,390 to coincide with the introduction of the euro in 2002. Given increasing inflation since the introduction of the current threshold, the value of threshold has reduced significantly in real terms. Taking inflation into account, the 1987 threshold would equate to approximately €46,500 in 2009 values. In this context, a greater level of lower priced medical appliances now qualify under the order than when the relief was originally introduced. In the circumstances, therefore, there are no plans to change the current threshold.

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