The Minister for Finance will bring forward legislative changes in the Finance Bill 2011 to deal with the VAT treatment of housing supplied by public bodies, including local authorities, after 1 July 2010, which was acquired or developed by them before that date, and where there was no entitlement to deductibility on VAT inputs.
Readers will be aware that from 1 July 2010 properties supplied by public bodies and local authorities are subject to VAT. However, where the property was acquired or developed before such charge to VAT, there would be no entitlement to deduct input VAT in respect of the purchase or development of the property. To overcome this, the Minister for Finance announced last week that a transitional VAT adjustment measure is being introduced.
Where a public body supplies property on or after 1 July 2010, VAT at 13.5% must be accounted for on the sale. The public body will be entitled to claim a deductibility adjustment in respect of that sale and this will be calculated in accordance with the Capital Goods Scheme rules. However, the public body will not be entitled to an adjustment amount that is greater than the VAT on the sale.
The statement from the Dept of Finance is available here.