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

ROYAL COLLEGE OF SURGEONS IN IRELAND The Royal College of Surgeons in Ireland is a privately owned Institution founded in 1784. It has responsibility for post-graduate education of surgeons, radiologists, anaesthetists, dentists and nurses. The College manages an International Medical School for the training of doctors, many of whom come from Third World countries where there is a great demand and need for doctors. Research in the College includes work on cancer, thrombosis, high blood pressure, heart and blood vessel disease, blindness, mental handicap, birth dcfects and many other human ailments. The College being an independent institution is financed largely through gifts and donations. Your donation, covenant or legacy, will help to keep the College in the forefront of medical research and medical education. The College is officially recog- nised as a Charity by the Revenue Commis- sioners. All contributions will be gratefully re- ceived.

Enquiries to: The Registrar, Royal College of Surgeons in Ireland, St. Stephen's Green, Dublin 2.

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