Revenue has responded to concerns raised at recent meetings of the TALC Indirect Taxes sub-committee regarding the interaction of VAT and Relevant Contracts Tax (RCT) in the context of certain property-related transactions. The issue concerned the applicability of the VAT reverse charge on single contracts entered into between developers and Approved Housing bodies/Local Authorities which included both the sale of a site and the supply of building serves.
In its response, Revenue addressed the various scenarios submitted subject to the caveat that the application of RCT to a contract will depend on the facts of each case and the contractual arrangements between the parties. The note concludes as follows:
“In summary, as previously mentioned from a VAT perspective, in general, the supplier is responsible for accounting for the VAT. However, where RCT applies, the person accountable for VAT depends on the RCT position of each agreement. Essentially, the recipient of the supply acting as a principal contractor for construction operations must account for the VAT directly to Revenue as if they had made that supply (VAT reverse charge). Where a single contract includes the sale of land and the provision of construction operations to an [Approved Housing body/Local Authority], VAT on the sale of the land should be accounted for by the supplier. VAT on the construction operations should be accounted by the recipient under the reverse charge mechanism.”
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