Written answers

Wednesday, 17 October 2012

Department of Finance

Tax Reliefs Availability

Photo of Joe HigginsJoe Higgins (Dublin West, Socialist Party)
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To ask the Minister for Finance further to Parliamentary Question No. 77 of 4 October 2012, regarding Section 535 of theTaxes Consolidation Act 1997 and the CGT exemption, if payments for crash repairs which exceed the €1,270 threshold and have been paid by the insurer directly to the insured and not paid to the garage or shop, have a tax liability; if there is not also an outstanding VAT liability on the moneys paid by the insurer but not paid to the garage or shop and regarding the tax neutral aspect, the number of such claims requesting that a payment to be treated as tax neutral have been received by the Revenue Commissioners. [45368/12]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that a car used for the purposes of a trade or profession, which qualifies for capital allowances is a chargeable asset for capital gains tax purposes. Accordingly, any insurance recovery in respect of damage to that car is a disposal /part disposal for capital gains tax purposes. Where the car is damaged (but not a write-off) and the entire insurance monies (or all but an amount not reasonably required) are used to restore the car, the taxpayer can claim to have the proceeds not treated as a disposal at the time, in effect the gain (if any) is deferred pending the ultimate disposal of the car. Where a car used for the purposes of a trade or profession is written-off and the insurance proceeds are used to acquire another car, the taxpayer can similarly claim to defer any capital gains tax on the gain (if any) that arises. It is not readily possible to provide details of such claims. Where the proceeds of an insurance recovery are not used, as above, to repair/replace the car then the gain (if any) would be chargeable, subject to the annual exemption of €1,270 provided for in the capital gains tax code in the case of gains made by individuals.

A car used exclusively for private purposes is not a chargeable asset for capital gains tax purposes – it being regarded as a wasting asset. Accordingly any insurance proceeds received in respect of damage to such a car would not be subject to capital gains tax.

Vehicle repair and maintenance services are liable to VAT at the reduced rate, currently 13.5% and VAT is applicable to these services regardless of who pays for the services, that is, an insurance company directly or a VAT-registered trader or a private individual from monies paid out to them under an insurance policy. Insurance and reinsurance transactions, that is premium payments and insurance proceeds, are exempt from VAT. Therefore, there is no outstanding VAT liability on monies paid by insurers directly to those insured for the cost of repairs since the trader supplying the repair services is liable to account for the VAT.

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