Eoin Ó Broin (Dublin Mid West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

275. To ask the Minister for Finance if 13.5% VAT can be reclaimed on retrofit costs for homeowners; and if not, the reason. [10030/22]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

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.  Under the EU VAT Directive and Irish VAT legislation the supply of building materials is liable to VAT at the standard rate, currently 23%.  Member states are not permitted to apply a VAT rate lower than the standard rate to building materials.  By way of special derogation from the general rule, however, Ireland is permitted to continue to apply a reduced rate, currently 13.5%, to the supply of ready-to-pour concrete and certain concrete blocks but this reduced rate cannot be reduced below 12%.

Construction services that consist of the "renovation and repairing of private dwellings, excluding materials which account for a significant part of the value of the service supplied" can benefit from the reduced rate of VAT, currently 13.5%.  This means that where a building contractor carries out home improvements and the materials cost does not exceed two-thirds of the cost of the improvements then the reduced rate of 13.5% applies to the total construction service.  A consequence of this is that a VAT registered building contractor will generally be entitled to recover VAT at the 23% standard rate on most building materials purchased while the contractor is only liable to charge VAT at the 13.5% reduced rate on the total supply (including the materials and the labour elements of the job) to the homeowner.  The difference in rates between the 23% input VAT and the 13.5% output VAT should normally be reflected in the VAT-inclusive cost to the homeowner.

On the suggestion of a VAT compensation mechanism for homeowners, I am advised by Revenue that this is generally contrary to the operation of VAT. It is for this reason that Ireland has not introduced any new VAT refund orders since the 1980’s and any changes to VAT refunds since then have been either by EU requirement or making minor changes to existing orders.

The Deputy will be aware that Government is committed to the delivery of a National Retrofit Plan, approving a package of supports to make it easier and more affordable for homeowners to undertake home energy upgrades, for warmer, healthier and more comfortable homes, with lower energy bills. The measures address barriers to undertaking energy upgrades (retrofits) reported by homeowners and those working in the industry.

The changes represent an important step in delivery of the National Retrofit Plan, which identifies a range of measures aimed at driving demand for retrofit, expanding the size and capacity of the supply chain, as well as making retrofits more affordable.