In anticipation of the changes to the VAT on Property regime in Finance Act 2008, the Minister for Finance has issued a Tax Policy Notice. This is to clarify the effective date of any proposed changes, and takes into account the reality that many property transactions have a significant lead-in time.

The policy notice is in relation to the position for certain property transactions that are under negotiation prior to the publication of Finance Bill 2008.

The notice goes on to state:

“When completed, these transactions may be taxed in accordance with the present rules as if those rules were still in place, subject to the following conditions —

Negotiations must have started in relation to the granting of a leasehold interest in a newly developed property prior to publication of new measures in the Finance Bill 2008 [usually end of January or early February];

The prospective tenant must not be entitled to deduct 90% of the VAT charged;

The development of the property must have started before the publication of the Finance Bill 2008;

The transaction must be an arm's length, commercial, bona fide transaction between unconnected landlord and tenant;

Full details of the transactions must be notified to Revenue.

If these conditions are met, the landlord may treat the transactions for VAT purposes as if they had taken place prior to the enactment of the new rules so, in effect, the new provisions will not apply to those transactions.”

CCAB-I had signalled in its submissions to the VAT on Property review that the position for pending transactions in the event of legislative change needed to be clarified. Therefore this notice is welcome.

In relation to the information required by Revenue concerning the transitional arrangements, a Revenue eBrief states:

“In order to avail of these transitional arrangements the landlord should notify Revenue, in writing, prior to the date of passing of the Finance Act 2008, of his or her intention to avail of the transitional arrangements in respect of a specific property transaction and include the following details:

The name and address of the landlord and tenant and their respective VAT numbers, where they have VAT numbers.

The address of the property in question.

Full details of the transaction, e.g. draft letting agreement, building agreement or whatever form of documentation is necessary that illustrates, to the satisfaction of the Revenue Commissioners, how the transaction will be completed between the two parties.

Confirmation by the tenant that in its most recent complete financial year its entitlement to deduct, as agreed with the Revenue Commissioners, was less than 90% or that the property is to be used for an activity that will give rise to a less than 90% entitlement to deduct VAT.

A joint confirmation by the landlord and the tenant that the transaction is an arms-length, commercial, bona fide transaction and that the landlord and tenant are unconnected parties.

This information should be furnished to the local Tax Office of the landlord or to Large Cases Division if the landlord normally has his or her tax affairs dealt with by that division. Upon receipt of the documentation Revenue will acknowledge that it has been received.

Revenue reserve the right to request further information if required.”