Circular Fin 02/20105 February 2010


VAT on local authority services

A Chara,


I am directed by the Minister for the Environment, Heritage and Local Government to refer to the proposed changes to VAT legislation contained in the Finance Bill 2010.



The European Court of Justice (ECJ) in July 2009 delivered its judgement in a case against Ireland in respect of the charging of VAT by public bodies on certain economic activities.  The judgement has implications for all public bodies in Ireland, including local authorities.


The Department has been involved in discussions with the Department of Finance and the Revenue Commissioners on the interpretation of the judgement and its implications for local authorities.  These discussions are ongoing and the information contained in this Circular is a preliminary note, setting out the main parameters of the implementation project.  Further information will be circulated as soon as it becomes available.


It is clear at this stage that VAT will need to be added to certain local authority service charges.  Changes in local authority accounting systems may be required to account for the new VAT charges.


Local authority services

Following a review of the judgement, the Revenue Commissioners are of the view that VAT must be applied to all local authority services where competition with private sector service providers could occur. The interpretation is very broad and suggests that, as a starting point, every service provided is liable to competition, other than those provided by local authorities as part of their regulatory or statutory function (activities termed ‘outside the scope of VAT’).


The Department of Finance has indicated that, further to legal advice provided by the Office of the Attorney General, water and waste water charges will continue to be exempt from VAT. This exemption is provided for in the Finance Bill.



In general, VAT inputs are deductible on the purchase, acquisition or importation of goods or services which directly relate to the provision of taxable services.


If the inputs relate solely to the provision of taxable services then the VAT is fully deductible, if not, it must be apportioned.  Apportionment may be appropriate for local authorities as the services provided are partially taxable, partially exempt and partially outside the scope of VAT.


The Revenue Commissioners are conducting a review of how apportionment might be applied to local authorities.  Further guidelines will be issued once this review has been completed.



The legislation required to give effect to the changes in the VAT system is included in the Finance Bill 2010 which also sets down 1 July 2010 as the commencement date for the new regime. Any local authority that does not yet have a VAT number should apply for one.


IT System issues

All local authority IT systems will need to be fully VAT enabled prior to the proposed commencement date of 1 July 2010.  For Agresso sites, initial discussion will be required between the LGMA, the Department and local authority representatives to develop a scope of work.  Authorities in non-Agresso sites should proceed to review the VAT module applicable to their system to ensure that it will be available to them for use by that date.


Revenue Commissioners

The Revenue Commissioners have indicated that they will be establishing a national co-ordination group, and that a contact person will be available to each local authority at their local tax office.  They have indicated that this support will be in place by the second quarter of 2010.


Analysis of type of services

A wide range of services are provided by local authorities.  Each local authority should commence immediately a review of the services they provide to determine which are ‘outside the scope of VAT’, which are taxable and which are exempt. The Department, in consultation with a small group of local authorities, has compiled a draft list of services provided. This list is attached at Appendix 1. To assist in identifying the scope of services offered by local authorities, the template attached at Appendix 2 should be completed and returned to Emma Reeves by Friday 12 February, identifying any services that are provided by your authority and not already included in Appendix 1.


VAT rates applicable

The VAT rates applicable to each service are determined by the Revenue Commissioners according to their usual criteria.


For example, the following general rates are applicable:

  • Waste – bags, tags, wheelie bins, landfill at 13.5%
  • Water and waste water provision is exempt.  However, testing and analysis of water samples attracts VAT at 21%.
  • Car parking at 21%
  • Library internet access and photocopying at 21%
  • Advertising space at 21%

Working Group

A small working group is to be established comprising the Department and Heads of Finance. This group will review the templates provided and agree a standard service list common to all local authorities. It is anticipated that this group will review this standard services list, agree the classification of the items, and, in conjunction with the Revenue Commissioners, agree VAT rates applicable.  It is also envisaged that the group will review any proposals for the method of apportionment of inputs and agree a scope of work in respect to any required IT system changes.


Queries in respect of this Circular may be addressed to Emma Reeves (01) 888-2482 or by e-mail to


Mise, le meas,



Colm Lavery

Principal Officer

Local Government Finance 

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