Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source

173. To ask the Minister for Finance if he will exempt flood gates for private homes from VAT to assist homeowners to protect their properties from flooding; if he will consider introducing a tax incentive scheme for private home owners to assist them in protecting their property from flooding with the construction or purchase of non-return valves, flood defences, renovations and flood barriers; and if he will make a statement on the matter. [7688/14]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am advised by the Revenue Commissioners that the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply.  Section 46(1)(a) of the Value Added Tax Consolidation Act 2010 provides that VAT at the standard rate, currently 23%, is chargeable on goods and services that are not specified in the Schedules to the Act.  Flood gates are not specified in the Schedules. 

A change in VAT rates must be in compliance with EU VAT law. The EU VAT Directive (Council Directive 2006/112/EC) generally provides that supplies of goods and services be chargeable to VAT at the standard rate but that lower rates are permitted in very limited circumstances.  Those circumstances do not extend to exempting flood gates from VAT.

However, homeowners may avail of the Home Renovation Incentive (HRI) in the carrying out of flood prevention works at their home, subject to compliance with the terms of the scheme. The HRI provides for tax relief for homeowners by way of a tax credit at 13.5% of qualifying expenditure incurred on repair, renovation or improvement work carried out on a homeowner's only or main residence.

Qualifying expenditure must cost a minimum of €5,000 (inclusive of VAT) which would attract a credit of €595.  Where the cost of the work exceeds €30,000 (exclusive of VAT) a maximum credit of €4,050 will apply. The credit is payable over the two years following the year in which the work is carried out.  Works carried out between 25 October 2013 and 31 December 2013 will be considered to have taken place in 2014 for the purposes of awarding the tax credit.

It is worth noting that the minimum threshold does not have to be reached by each contractor where a homeowner engages a number of contractors to carry out different works. So long as the aggregate payments reach the minimum threshold of €5,000 inclusive of VAT, the homeowner will qualify for the credit.

Work must be carried out by a qualifying contractor. If work is grant aided or, if any form of insurance or compensation is received in respect of the work, the amount of relief will be reduced.  The incentive runs to the end of 2015.  However, where planning permission for qualifying works is required and is in place before 31 December 2015, any work carried out between 1 January 2016 and 31 March 2016 will qualify for the relief.

Qualifying expenditure under the incentive is expenditure which is subject to the 13.5% VAT rate.  Expenditure which is subject to the 23% standard VAT rate does not qualify for relief.  Building services consisting of construction, demolition, alteration or reconstruction are liable to VAT at the reduced rate of 13.5% unless the value of goods, such as flood gates, etc., exceeds two-thirds of the total amount charged by the contractor.  Where this happens, the contractor will charge VAT at the standard rate of 23% on the total amount and this total amount is excluded from relief under the incentive.  A contractor may be in a position to invoice separately for materials and labour and, in such circumstances, the labour amount, that is chargeable at 13.5%, can come within the HRI relief.  This practice is acceptable provided the split between materials and labour is realistic and is not done to avoid VAT.