The Finance Act 2022 (the Act), which was signed into law in December 2022, introduced the Defective Concrete Products Levy (the Levy).
The Levy, which came into effect on 1 September 2023, was introduced as a measure to ensure that the construction sector would contribute to the cost of funding the redress scheme established by the Government for those affected by the use of defective concrete products in the construction of their homes.
The Levy applies to the “first supply” of certain concrete products that are supplied on or after 1 September 2023. The Levy applies at a rate of 5% of the open market value of the concrete product on the date of its first supply.
The relevant statutory provisions can be found in Section 99 of the Act which inserts Part 18E and Schedule 36 into the Taxes Consolidation Act 1997.
The Act defines “concrete” as material formed by mixing cement, coarse and fine aggregate and water, with or without the incorporation of admixtures, additions or fibres, which develops its properties by hydration.
The Levy applies to concrete products, i.e., products that contain concrete and are either:
(a) of a type required to comply with the following standards:
(i) EN 771-3:2011+A1:2015 – Specification for masonry units - Part 3: Aggregate concrete masonry units (Dense and lightweight aggregates); and
(ii) EN 771-4:2011+A1:2015 - Specification for masonry units - Part 4: Autoclaved aerated concrete masonry units,
(b) constitute concrete that is ready to pour.
Precast products themselves do not come within the scope of the Levy.
There was some uncertainty in the industry as to whether the pouring concrete element of a precast product would be subject to the Levy. However, the Government announced in early September 2023 that an amendment would be introduced in the Finance Act 2023 to specifically exclude the value of pouring concrete used in precast products from the scope of the Levy.
It is understood that the amendment will come into effect on 1 January 2024, with a refund scheme applying for the interim period to the end of 2023.
Chargeable persons are accountable for and liable to pay the Levy. A chargeable person is a person who makes the first supply of a concrete product. The liability for payment of the Levy remains with the chargeable person and cannot be passed on to the party to whom the supply is made.
The first supply of a concrete product arises when a chargeable supply of that concrete product occurs in circumstances where a previous chargeable supply of that concrete product has not occurred.
A “chargeable supply” can constitute any one of the following:
(i) the supply of a concrete product by a person in the State in the course of any business carried on in the State by that person in circumstances where the ownership of the concrete product is being transferred by agreement or sale;
(ii) the assignment of a concrete product for use in a business (in circumstances where no agreement or sale takes place), by a person in the State; or
(iii) the supply of a concrete product for private use or use in the course of a business in the State, by a person in the State.
Where a chargeable supply has been made within the State, the Levy will not apply to any second or subsequent supplies of that concrete product.
The Revenue Commissioners will maintain a register of all chargeable persons in the State.
A chargeable person is required to register with the Revenue Commissioners as a chargeable person for the purposes of the Levy, prior to making a first chargeable supply of a concrete product.
The chargeable person must provide their name, tax reference number and business address to the Revenue Commissioners to register.
A chargeable person will also have to provide the following information to the person receiving the concrete product:
1 The amount of the Levy that applies to the concrete product; and
2 The date of supply of the concrete product.
The name of the chargeable person will also need to be provided but only where the ownership of the concrete product is being transferred by agreement or sale.
A chargeable person will also be required to maintain full and accurate records of all first supplies of chargeable concrete products made during an accounting period.
The records that should be maintained may include the following:
(a) invoices, delivery and purchase records;
(b) specific concrete products information which will enable the identification of the type of concrete products;
(c) documentation setting out the open market value of the products on the supply date;
(d) the calculation of the Levy and details of any payments made to the Revenue Commissioners; and
(e) copies of documentation required to be issued by the chargeable person to the person receiving the concrete products (as outlined above).
These records must be retained for a period of six years from the end of an accounting period in which a return has been made.
A chargeable person will be required to submit a full return and self-assessment to the Revenue Commissioners and pay any Levy that arises during an accounting period within 23 days of the end of that period.
The return should include the following information:
1. the sum of the open market values of chargeable concrete products that were supplied during the relevant accounting period; and
2. the amount of Levy due for that accounting period.
For the purposes of the Levy, the accounting periods occur on a bi-annual basis. The first accounting period will be from 1 September 2023 to 31 December 2023. The subsequent periods will then run from 1 January to 30 June and 1 July to 31 December every year.
It is important to note that even where no Levy occurs during an accounting period, a chargeable person is still obliged to file a return to the Revenue Commissioners.
If a chargeable person does not pay the Levy due on or before the due date (being 23 days after the accounting period in which the Levy arises), the unpaid Levy attracts daily interest which accrues from the date the Levy payment is due until the amount is paid in full.
The following penalties may also apply if a chargeable person fails to comply with their obligations under the Act:
1 If a chargeable person fails to issue the required documentation to the person that receives a first supply or fails to create records of the supply as required under the Act, they may be liable to a maximum penalty of €500.
2 If a chargeable person fails to charge the Levy on the date of supply as required under the Act, they may be liable to pay the Levy not charged along with a maximum penalty of €4,000.
3 If a chargeable person fails to file a return before the expiration of 23 days after the relevant accounting period, they may be liable to a maximum penalty of €4,000.
4 If a chargeable person fails to retain the required records in relation to a supply of chargeable concrete, they may be liable to a maximum penalty of €3,000.
Parties to construction contracts which involve the supply of concrete products will need to consider how best to manage this new cost, particularly in circumstances where a first supply of concrete products is envisaged in a contract which has not already taken account of the Levy. In such circumstances, legal advice may need to be sought on how best to allocate the risk.
For chargeable persons, particularly those operating as businesses, the new obligations arising from the Levy will need to be carefully considered and synchronised into their existing accounting and taxation practices.
It is of particular importance for chargeable persons to comply with these obligations in the context of obtaining a tax clearance certificate from the Revenue Commissioners. The Revenue Commissioners have warned that if a rechargeable person fails to meet the obligations outlined above, there is a risk that an application for tax clearance may not be successful. Specific tax advice should be sought in these circumstances.
For more information on any aspect of the above article, please contact a member of our Projects and Construction Team.
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