Charlie McConalogue (Donegal North East, Fianna Fail)
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13. To ask the Minister for Finance when a final response will issue regarding correspondence (details supplied) sent to his Department; and if he will make a statement on the matter. [44570/14]

Michael Noonan (Limerick City, Fine Gael)
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A response to your correspondence, in relation to the VAT treatment of the installation of fixtures and fittings and cross-border concerns, was issued on 20 November 2014. 

In the first instance it is worth pointing out there is no competitive disadvantage between UK and Irish VAT registered business in terms of supplying to a UK business. Depending on the supply being offered, different variations of VAT treatment may apply, but in all cases, suppliers established in Ireland compete on a level playing field in the UK market with UK established suppliers.

The EU VAT Directive, with which Irish and UK VAT legislation must comply, distinguishes between a supply of goods and a supply of services.  Where an Irish VAT registered trader makes a supply of goods to a UK business, the Irish trader zero-rates the supply and the UK business self-accounts for VAT on the goods.  If the UK trader purchases the goods from a UK business, VAT would apply on the supply as normal.  In both cases the UK trader will have the right to deduct the VAT charged on the goods if they are used for their taxable supplies.  In this case the VAT treatment of the supply of goods is the same whether the supply is made from an Irish or a UK based supplier.

With regard to the supply of a service of the installation of fittings to a UK business, the same VAT treatment applies.  Where supplied by an Irish company, the service is zero-rated, and the UK business self-accounts for VAT.  Where supplied by a UK company VAT is charged on the supply as normal.  In both cases the UK trader will have the right to deduct the VAT charged on the service of the installation of fittings if they are used for their taxable supplies.  Again, there is no difference in the entitlement to deduct input VAT by the UK company who receives the services, whether the supplier is based in Ireland or the UK.

The VAT situation differs where the service being supplied relates to the installation of fixtures, but in any event, there is no discrimination in terms of VAT deductibility depending on the location of the supplier.  Where a service consists of the installation of fixtures, the place of supply for VAT purposes will be the country where the installation takes place.  In the case referred to in your correspondence, the installation of fixtures will take place in Ireland which means the service is liable to VAT in Ireland.  In this situation the service should be charged with Irish VAT by both the Irish supplier and by the UK supplier, who will have to register for VAT in Ireland if not already registered. The UK recipient of the service will be charged to Irish VAT regardless of where the supplier of the service is based.  Where they are entitled to input VAT deductibility on the service received, the UK business can make a claim to the UK revenue authorities for a refund of the Irish VAT charged on the service.  While the VAT treatment is different in the case of the service of the installation of fixtures, than in the case of the service of the installation of fittings, and the supply of goods in general, it is still the case that UK and Irish suppliers of these services and goods operate on a level playing field in terms of VAT.

Clare Daly (Dublin North, United Left)
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14. To ask the Minister for Finance the steps he will take to amend the situation of taxation on rental income in cases where homeowners acquired property as their primary residence and had to leave it as they were no longer able to afford to pay the mortgage, or their family circumstances changed, leaving them unable to dispose of the property as a result of it being in substantial negative equity and choosing to rent it instead, the rental income being considerably less than the mortgage repayments and the injustice of them then having to pay a heavy taxation bill on this loss; and if he will address this matter. [44573/14]

Michael Noonan (Limerick City, Fine Gael)
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Rental income for tax purposes from such property is the gross rental income less allowable expenses incurred in earning that rent, as specified in section 97(2) of the Taxes Consolidation Act 1997. The main deductible expenses are:

- any rent payable by the landlord in the case of a sub-lease;

- the cost to the landlord of any goods provided or services rendered to a tenant;

- the cost of maintenance, repairs, insurance and management of the property;

- the interest paid on borrowed money used to purchase, improve or repair the property (which, in the case of residential property, is restricted to 75% of the interest and is subject to compliance with PRTB registration requirements for all tenancies that existed in relation to the property in the relevant year); and

- payment of local authority rates.

In addition, wear and tear capital allowances are available in respect of the capital expenditure incurred on fixtures and fittings provided by a landlord for the purposes of furnishing rented residential accommodation. These allowances are granted at the rate of 12.5% per annum of the actual cost of the fixtures and fittings over a period of 8 years.

Where the aggregate of deductible expenses in any year exceed the gross rental income, the amount of the deficit is set against rental profits of the same year from other property. Where there are no other rental profits in the same year, the deficit is carried forward as a rental loss for offset against rental profits in future years.

I have no plans at the moment to change the tax treatment of rental income for tax purposes, however, as a matter of course all such taxation measures and reliefs are considered in the context of the annual budgetary process.