Leo Varadkar (Dublin West, Fine Gael)
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Question 178: To ask the Minister for Finance if contractors based in Northern Ireland that are awarded building, electrical and civil engineering contracts here are liable for VAT in the Republic of Ireland or Northern Ireland. [10176/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am advised by the Revenue Commissioners that the place of supply of goods and services for VAT purposes is subject to the requirements of EU VAT law with which Irish VAT law must comply. Under the EU VAT Directive the supply of construction works or civil engineering works are treated as being made where the immovable goods or the associated lands are situated.

Thus, services such as those outlined by the Deputy are supplied where the land is situated, irrespective of the place of belonging of the supplier or the recipient of the supply. Accordingly, if contractors based in Northern Ireland are awarded building, electrical or civil engineering contracts in the State, then liability to VAT arises in the State in all cases.

Finally, I would add that under what is known as the reverse charge mechanism, where a sub-contractor, whether or nor established in the State, supplies construction services in the State to a principal contractor, it is the principal contractor who must account for the VAT due in respect of the supply of such services.

It is a particular priority of the Government to ensure as much as possible that difficulties in relation to mortgage arrears do not result in legal proceedings for home repossession. Home repossession should be, and generally is, the last resort for the lender and the preferred method of dealing with arrears cases should be early intervention.

The finalised recapitalisation scheme announced on 11th February 2009 includes a new code of conduct for Mortgage Arrears, based on the Irish Banking Federation Code of Practice on Mortgage Arrears which has been issued by the Financial Regulator and came into force on the 27 February 2009. The new Code applies to mortgage lending activities to consumers in respect of their principal private residence in the State and is mandatory for all mortgage lenders registered with the Financial Regulator. Under the mortgage arrears code where a borrower is in difficulty the lender shall make every reasonable effort to agree an alternative repayment schedule i.e. consideration should be given on a case-by-case basis to alternatives such as deferral of payments, extending the term of the mortgage, changing type of mortgage, or capitalising arrears and interest. In any case, lenders will not commence legal action for repossession until after six months from the time arrears first arise.

In addition as part of their recapitalisation scheme, the two banks concerned, A.I.B. and Bank of Ireland, will not commence court proceedings for repossession of a principal private residence until after 12 months of arrears appearing where the customer continues to co-operate with the banks.