Noonan refuses to abolish VAT on personal insolvency service
Tensions are likely to rise between Labour and the Finance Minister Michael Noonan over his refusal to consider ending VAT of 23 per cent on those who use the Government's new insolvency service.
In particular, a concern is growing within Labour over the double standards being applied to the collection of VAT in Irish and UK personal insolvency plans.
Under Alan Shatter's current legislation those availing of the embattled minister's insolvency regime will have to pay 23 per cent VAT on top of fees charged by the Personal Insolvency Practitioner.
Given that those planning to enter the personal insolvency process can expect to be charged around €300 for an initial consultation, and several thousand euros to employ an intermediary to manage their case, a VAT rate of 23 per cent, which is charged to the applicants, represents a significant extra cost.
However, the result of a landmark UK case, where insolvency practitioners challenged the imposition of VAT on home repossessions, is likely to increase pressure on Mr Noonan to reverse the current position.
The Labour Donegal Senator Jimmy Harte, who has raised the issue with Mr Noonan on numerous occasions, told the Sunday Independent that "initially the UK, which has a similar system to us, imposed VAT on insolvency cases until this was challenged''.
VAT is no longer charged in home insolvency proceedings and the British Revenue have not challenged the decision. To date, Mr Noonan has been "very non committal'' about changing the current rate because Personal Insolvency Practitioners are acting in a capacity similar to liquidators, receivers or examiners, whose services are also subject to VAT at the standard rate.