Finance Act 2009 - VAT issuesChanges to waiver of exemption rules and late payment interest rate |
Waiver of exemption
The Finance Act 2009, which was signed into law on 3 June 2009, changed the rules that apply to a landlord that opted to tax his lettings under the mechanism known as the waiver of exemption. A key effect of the new rules is that the waiver of exemption is, in certain circumstances, treated as cancelled without the landlord having to apply to Revenue for the cancellation, which previously had been the position. The result of the cancellation is that the landlord may have to make a payment to Revenue. In broad terms, this payment is based on the difference between the VAT input credits claimed relating to the properties that were the subject of the waiver of exemption and the VAT paid to Revenue in respect of those properties.
If you have or had a waiver of exemption in place since 1 July 2008 you may have an exposure to a tax liability and you should review your position to establish if, due to the new legislation, you have to make a payment to Revenue. It would be critical that any payment due is made to Revenue in a timely manner to avoid any interest or penalty charges.
Interest rate
The Finance Act also reduced the rate of interest that Revenue charges on late payment of VAT to 10% per annum (based on a daily rate of 0.0274%) effective from 1 July 2009. Before 1 July the annual rate was 12%.
For further information on our VAT services please do not hesitate to contact a member of the VAT team.