A Committee Stage amendment proposed the introduction of a new subsection into section 4C of the VAT Act 1972. The new subsection will replace the existing subsection (10) and will provide that the “big-swing” rule in the Capital Goods Scheme (CGS) will apply to transitional properties. Revenue has published Tax Briefing 2 which sets out the situations in which the “big-swing” rule will apply together with some practical examples.

The CGS scheme is a mechanism for regulating VAT deductibility over the VAT-life of a developed property. The scheme operates by ensuring that the VAT deductibility for a property reflects the use to which the property is put over the VAT-life of the property. If there is a change in the taxable use of the property the scheme requires an adjustment to the initial deduction taken.

The “big-swing” rules, which are contained in section 12E(6)(a) of the VAT Act 1972, are special rules that recognise the fact that there has been a significant change in the taxable use of a property and operate by providing for an adjustment at the end of a VAT interval.

The “change of use provisions” which include the “big-swing” rule, are provided for under section 4C (10) of the VAT Act 1972. In the absence of the proposed Committee Stage amendments to subsection (10), these provisions would not apply to transitional properties.

Revenue's Tax Briefing 2 clarifies the meaning of “first use” and “changed use” and sets out examples of how the rule will operate in practice.

Revenue's VAT on Property Guide which includes three chapters on the CGS scheme is available at http://www.revenue.ie/en/tax/vat/leaflets/index.html

Tax Briefing 2 is available at http://www.revenue.ie/en/practitioner/tax-briefing/2010/no-022010.html