The Gazette 1982

GAZETTE

APRIL 1982

There seems to be some doubt as to the precise

V.A.T. position with regard to certain temporary con-

venience arrangements. Factor F, having an immediate

requirement for 10,000 square feet, but also having an

eye to future expansion, takes a thirty-five year Lease of

15,000 square feet for a three year term. He is invoiced

for V.A.T. on the granting of the thirty-five year Lease,

for which he claims an input credit. I believe that the

Revenue Commissioners will deem the short term letting

to be a "self-supply" and taxable accordingly, but I

know that some of the experts will contend that this is

wrong on the basis that the transaction was merely of an

incidental nature, and was not effected "in the course of

furtherance o f " Factor F's business. Alternatively, part

of the V.A.T. reclaim may be disallowed on the ground

that the surplus area was not occupied, and the question

will then arise as to whether it is recoverable at the end

of the three year term.

The right to opt for liability to V.A.T. on rents can

counteract the adverse effect, which may result from the

type of situation envisaged at (B) above. It may, accor-

dingly, be opportune, albeit slightly out of context, to

deal at this juncture with the V.A.T. implications of

rents

per se.

Rents

Rental income as such is (subject to certain excep-

tions) exempted from V.A.T., but the party in receipt of

same may voluntarily waive the exemption, provided

that his election covers all his rent producing premises.

It is notable that the Revenue Commissioners appear to

interpret the reservation of a rent on the granting of a

term of not less than ten years as part of the considera-

tion for the demise, and therefore covered, so far as

V.A.T. legislation is concerned, by the tax chargeable

on the granting of the relevant Lease. Seemingly, in the

philosophy of V.A.T., such a rent ceases to exist. It is

not, accordingly, effected by the exemption aforesaid or

an election to waive same. Consequentially, the provi-

sions as to election would seem to be limited to rents

reserved by the (B) type Lease. It is expressly enacted

that a "self-supply" represented by such a Lease is to be

excluded from the V.A.T. levy in circumstances where

the party concerned becomes chargeable to tax in

respect of the rent thereunder.

A waiver of the exemption in respect of V.A.T. on

rents may be cancelled, provided that the tax-payer

refunds the excess of tax repaid to him over the tax

payments made by him for the period, during which the

election operated.

There are other factors which might be relevant in

considering a possible waiver of exemption in respect of

rental income. A Lessor, who is faced with substantial

repairs might contemplate such a course, and it might

also merit examination where there would be little in-

convenience to his Lessees, as for example, where they,

or a majority of them, are V.A.T.-registered.

The right to elect to waive the exemption in respect of

rents is vested solely in the Lessor, and may apparently

be operated even if the Lease itself contains no provi-

sion in such behalf. A Lessee, who is not an accountable

party, may therefore find himself having to pay V.A.T.

on rent without the right of reimbursement.

Amongst the exceptions to the general exemption

applicable to rents are those derived from lettings in the

course of carrying on Hotel businesses and from the

provision of parking accommodation for vehicles by

operators of car-parks.

Mortgages

Business Transfers

The granting of a Mortgage is outside the scope of

V.A.T., as also is (save in certain circumstances) the

transfer of ownership of property in connection with the

disposal of a business or part of a business to another

accountable person. However, where the basic criteria

apply a mortgagor could be taxed on the loss by him of

his equity of redemption.

Building Licences

There is a statutory provision to the effect that where

an accountable person disposes of an interest in, or

develops, property in circumstances involving the

application of the criteria aforesaid, and, in connection

with such disposal or development, some other person,

who would not otherwise be regarded as an accountable

person, disposes of an interest in relation to the proper-

ty, than that other person shall apropos the disposal by

him be deemed to be an accountable person and his

disposal shall be deemed to be a supply made in the

course of business. Thus a landowner will be regarded

as a taxable person where, in consideration of the pay-

ment of a site fine by a builder, he permits the latter to

construct a house on the site and thereafter assures an

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