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GAZETTE
APRIL 1982
Value-Added Tax — Property
by
Patrick Fagan, Solicitor
Premliminary
The basic concept of the scheme administered on foot
of the Value-Added-Tax legislation has been with us
sufficiently long as not to demand (at least in the present
context) an analysis of its underlying philosophy. Its
particular application in the property field has,
however, a number of significant features and connota-
tions, and a brief outline aimed at identifying some of
the practical aspects of a fundamentally complicated
subject may be of assistance.
Preamble
In the terminology of the V.A.T. enactments, we are
here considering "immovable goods", which expression
is defined as meaning "land", but can, by and large, be
taken to include buildings and fixtures (though not
necessarily fittings). Like most Revenue Law we have to
grope and research before any kind of picture emerges.
The basic charge emanates from Section 2, Value-
Added Tax Act, 1972, the relevant part whereof, in its
amended form, stipulates that a tax shall be levied and
paid: -
"on the supply of goods and services effected
within the State for consideration by a taxable per-
son in the course or furtherance of any business
carried on by him and on goods imported into the
State".
Criteria
Taking the matter a step further, the general proposi-
tion would seem to be that a taxable supply of im-
movable goods arises under the V.A.T. code where a
party: -
(1) having an interest, (being, when created, for a
period of at least ten years) in land
(2) which has been developed in whole or in part since
31 October, 1972
or
in relation to which or to the development whereof he
became entitled to claim a deduction by way of tax
credit
(3) disposes of that interest or an interest derived
therefrom
(4) in the course or in furtherance of business
It can be stated with reasonable confidence that, under
ordinary circumstances, all the foregoing points must be
satisfied before there can be a V.A.T. liability. Exigibili-
ty can, however, also arise in other instances, the most
notable of which are certain licences, compulsory pur-
chases and transactions which are deemed to be "self-
supplies".
Examples
With a view to demonstrating the general principles
enunciated examples of a few specific property transac-
tions are given and the outcome thereof in the V.A.T.
context considered.
Sales
Builder A, owning a freehold or long-leasehold site,
on which he has constructed a dwelling house since 31
October, 1972 will (assuming the application of the
foregoing criteria) suffer a V.A.T. charge in respect of
the sale of such property. If his purchaser is a non-
trader, the tax element will presumably be allowed for
and absorbed in the contract price. The property will be
regarded as having passed out of the V.A.T. net, and
tax will not be chargeable on subsequent transactions,
unless an entitlement to a tax credit or deduction arises
by reason of further development or otherwise. The case
follows on lines similar to a purchase effected in a
Department Store by a non-trader.
Landowner B will incur a charge on the disposal by
him of sites, which he has had serviced post-31 October,
1972 in circumstances entitling him to a tax credit in
respect of the relevant works.
Suppose that the foregoing sites are acquired by Con-
tractor C with a view to constructing houses thereon for
resale, the V.A.T. payable by Landowner B on the
disposal thereof will probably be invoiced by him to
Contractor C, who will be entitled to a credit for same
and for the V.A.T. charged to him on building materials
and the like. Tie will, however, suffer tax on the sale of
each constructed house as in the case of Builder A
(supra).
Taking the last situation a step further, we find Con-
tractor C deciding to use one of the houses as his own
private residence (viz. appropriating same for a purpose
other than that of his business). This gives rise to a
charge on the grounds that the appropriation is deemed
to be a "self-supply" - as to which see further
hereunder.
Tax will
prima facie
be chargeable in respect of the
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