The Gazette 1982

GAZETTE

APRIL 1982 Value-Added Tax — Property

by

Patrick Fagan, Solicitor

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-

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

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 29