VAT rules may breach EU directive

THE provision in Irish tax law which blocks the recovery of VAT on cars may be in breach of an EU directive, according to a tax expert.

The European Commission is challenging a similar provision in French law, which will result in the European Court examining the issue next year.

"There is now doubt whether the provision in Irish law which blocks the recovery of VAT on cars is in accordance with the overriding EU 6th directive," according to Mr Fergus Gannon, tax director at Deloitte and Tooche accountants.

Cars are one of the major items on which VAT cannot be reclaimed. The total yield to the Revenue Commissioners from VAT on cars last year was £144 million. "The action by the Commission will result in the validity of the block on means of transport under EU law being considered by the European Court," according to Mr Gannon.