Neale Richmond (Dublin Rathdown, Fine Gael)
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187. To ask the Minister for Finance if he has considered implementing a VAT exemption for self-build houses as is the case in Northern Ireland; and if he will make a statement on the matter. [8886/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that the VAT rating of goods and services is subject to the requirements of the EU VAT Directive, with which Irish VAT law must comply. In general, the VAT Directive provides that all goods and services are liable to VAT at the standard rate, currently 23% in Ireland, unless they fall within categories of goods and services specified in the Directive, in respect of which Member States may apply a lower rate or exempt from VAT.

A person who is self-building a house would expect to incur costs mainly for building materials and construction services, both of which are subject to VAT.

Under the EU VAT Directive and Irish VAT legislation the, supply of the building materials is liable to VAT at the standard rate. By way of special derogation from the general rule, however, Ireland is permitted to continue its long-standing practice of applying a reduced rate, currently 13.5%, to the supply of ready-to-pour concrete and certain concrete blocks but there are strict restrictions on this derogation, including that its scope cannot be extended to other building material and that the rate cannot be reduced below 12%. 

Under the EU VAT Directive the supply of construction services is liable to VAT at the standard rate generally across the EU but Ireland applies a 13.5% reduced rate of VAT to all construction services under a derogation from the EU VAT Directive, again subject to strict restrictions.

There is no provision in the Directive to permit the application of an exemption from VAT on construction services or building materials provided for a self-build.

As a general point of EU law, VAT is a tax on consumption and is applied to supplies being made by a person and not to supplies received by a person.  For that reason, it is not permissible to apply different VAT rates or exemptions to different customers.  Therefore, it would not be possible to accept a proposal to exempt from VAT supplies to particular categories of buyers, such as individual self-builders.

In relation to self-build properties, substantial support is already available through the tax system for first-time buyers, including those self-building their first home. The Help to Buy (HTB) incentive gives a refund of Income Tax and Deposit Interest Retention Tax (DIRT) paid in Ireland over the previous four years, subject to limits outlined in legislation. Section 477C Taxes Consolidation Act 1997 outlines the definitions and conditions that apply to the HTB scheme.

Finally, the Deputy referred to the VAT rate on self-builds in Northern Ireland. When it was within the EU, the UK, by way of special derogation from the general rule, was permitted to continue its long-standing practice of applying a zero rate of VAT to the supply of certain residential buildings and I understand it also has arrangements for a refund of VAT incurred on building materials and services when building a new home.  Since 1 January 2021, the UK is no longer part of the EU and, therefore, its VAT arrangements are no longer subject to the VAT Directive.