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Finance Bill 2012 – Key VAT changes

Wednesday, February 29, 2012

by Nick Ryan

I can only recall one year in the recent past where the Finance Bill provided any real interest from a VAT perspective and unfortunately this year provides for little to challenge us. A brief summary of the main changes are as follows:
VAT rate: increased with effect from 1 January 2012 to 23% from 21%.
Bread: Following pressure from within the industry the definition of bread is to be amended to widen the qualification for zero rating that would cover the majority of health food breads and ethnic bread products.
Construction services involving connected parties: This is an extension of the current rules applied for construction services provided by sub-contractors to principal contractors. From 1 May 2012 the reverse charge accounting facility can be applied to construction services between connected parties without the requirement for a principal/sub-contractor relationship to exist.
Ministerial Orders: These are provided to facilitate a VAT refund in a particular case where social or economic conditions support it i.e. the refund of VAT on the purchase or development of a farm building by an un-registered farmer. The changes proposed in the Bill provide for a greater control and include the facility for Revenue to claw back the VAT refund, in total or in part, where it is found that the claimant no longer satisfied the criteria at the time the refund was granted. I imagine this would be where the object that provided for the refund is no longer being applied to the use that enabled the refund in the first place.
District heating/cooling energy: With the passing of the Act green energy suppliers will be treated along the same lines as those persons who supply electricity orgas via the natural ga distribution system with VAT liable at 13.5%.
The Committee and Report stages might bring further changes and/or amendments to the above. For updates or further information on the changes then please contact the VAT Practice.