Seán Haughey (Dublin North Central, Fianna Fail)

I take this Adjournment matter on behalf of my colleague, the Minister for Finance, Deputy Brian Lenihan. I welcome the opportunity to explain to Members of this House the background to the scrappage scheme and to clarify the status of the repayment to car dealerships since the scheme began on 1 January 2010.

During the second half of 2008 and in 2009 there was a very considerable reduction in the sale of cars, especially new cars. The sharp decline in new car sales was an international phenomenon not unique to Ireland. Scrappage schemes were introduced in a number of EU member states with a view to assisting the motor industry. Such schemes assisted in slowing and in some countries reversing the significant declines in new car sales. Various sectors of the motor industry in Ireland sought the introduction of a car scrappage scheme to assist the sector, especially given the likely employment consequence further reductions in car sales would have. The Commission on Taxation also recommended that the introduction of a focused scrappage scheme should be considered in certain circumstances.

In that context the Government decided to introduce a car scrappage scheme aimed at replacing old cars with low CO2 emission cars. The Minister for Finance announced the scrappage scheme in his Budget Statement on 9 December 2009 and it has been enacted through the Finance Act 2010.

In summary the scrappage scheme operates from 1 January to 31 December 2010. VRT relief of up to €1,500 is available upon registration of a new vehicle, subject to the scrappage of a qualifying old vehicle. The VRT relief is provided where a new category A, or passenger car of emissions band A or B with CO2 emissions of 140g/km or lower is purchased and registered and an old car is scrapped.

To qualify for relief, the scrapped vehicle must have been registered in the State in the name of the purchaser of the new car for at least 18 months previous to the date of scrappage; on the day of scrappage be ten years old or more from the date of first registration; be scrapped on or after 10 December 2009 and no later than 31 December 2010; be scrapped within 60 days of the date of the new car being registered, or have been scrapped within the previous 60 days of the date of the new car being registered; have a valid NCT certificate of roadworthiness, or one that has expired no more than 90 days prior to the issue of the certificate of destruction, or documentation to indicate that it has been presented for and failed an NCT roadworthiness test in the previous six months; and have been insured for use on the road for at least 12 months in the 18 months prior to the issue of the certificate of destruction.

For the purposes of the scheme the term "scrapped" means that the old car has been taken to an end of life, ELY, authorised vehicle treatment facility and a certificate of destruction issued by the facility in respect of the car. In designing the scrappage scheme, one of the aims was to ensure the administrative burden on the State would be light. Accordingly, the scheme was designed so the onus was on the dealer to ensure the conditions were met. The legislation provided that all the paperwork associated with each claim would be kept by the dealer for a period of four years so in future audits the dealer's operation of the scrappage scheme could be examined by Revenue officials.

In furtherance of this aim, the claim form designed for the trader was also simplified to the extent that only four pieces of information were required by Revenue for each scrappage claim, namely, the registration number of the new vehicle, the registration number of the scrapped vehicle, the number of the certificate of destruction issued in regard to the scrapped vehicle and the amount claimed. In addition, the scrappage relief for up to 15 vehicles could be claimed on the one form.

The system was designed so that, on successful processing of a claim, a cheque was not issued to the dealer but rather their account with Revenue was credited to reflect the refunded amount. In addition, while there was no specific provision regarding the timing of the claim, it was always the view of the Revenue Commissioners that, in order to ease the processing burden, dealers should delay submitting their claims until the end of the month, or at the very least until a claim form had been fully completed, when 15 vehicles had been scrapped. This would reduce the amount of processing required in Revenue.

In practice, dealers began to submit claims on a weekly and sometimes even a daily basis, or even on a car by car basis. In the interest of customer service, Revenue aimed to process these claims as they came in, resulting in an almost immediate adjustment to the customer's account on receipt of the claim. Nevertheless, I understand from the Revenue Commissioners that due to industrial action there have been some delays in processing claims under the scheme. However, the position has improved significantly over recent weeks because, following the Croke Park discussions, the industrial action was withdrawn in that regard.

The current position is that over 4,500 claims have been processed under the car scrappage scheme up to 23 April 2010. Refunds of VRT amounting to around €6.5 million have been made to car dealers in respect of these claims. Currently there is no backlog of outstanding scrappage claims. I understand that some 80 to 100 claims per day are being received by Revenue at present and these are currently being processed on receipt or within a maximum of three working days.

Of course time can elapse between the date a garage sells the new car and the date the old car is scrapped, the certificate of destruction obtained and the VRT relief can be claimed from Revenue. However, having the old car scrapped is a necessary condition of the scheme for the claiming of the VRT relief. Such delay is unavoidable because it is a scrappage relief scheme. By definition the car has to be scrapped before Revenue can grant the relief. It is an inbuilt control and anti-avoidance feature of the scheme. If the Senator has specific information regarding ongoing delays in the processing of scrappage refund claims for certain dealers or garages, he might wish to take them up directly with the Revenue Commissioners.