Ireland has run into a spot of bother with the EU Commission over the reduced rate of VAT for greyhounds. In a month which saw plenty of difficulties for equestrian pursuits, queries are also being raised on the VAT applied to horses.

Ireland has been presented with a “reasoned opinion” from the Commission. A reasoned opinion usually allows a country two months to amend its legislation. Our VAT act grants a reduced VAT rate of 4.8% to the supply of horses and greyhounds, the hiring of horses and the sale of nomination services in studs. Failure to amend the legislation results in a case being taken to the ECJ, under similar arrangements to the item earlier in this issue concerning VAT and local authorities.

Under the VAT Directive, exemptions or rates that already existed in a Member State on 1 January 1991, can broadly continue to apply. The problem seems to be that the EU feels that matters have moved on. The Commission notes that while we had the reduced rates for our horses and greyhounds before 1991, “this measure does not fit the requirement of having a clearly defined social reason, nor does it seem to benefit the final consumer”. The term “final consumer” is perhaps unfortunate in the context, but we know what they mean.

In a related development, Ireland is also being challenged along with six other Member States on its approach to the VAT Grouping rule.