Key Contact: Angelyn Rowan- Partner
In September 2022 the Minister for Finance announced the introduction of a defective concrete products levy (the “Concrete Levy”) as part of Budget 2023. With the signing into law of the Finance Act 2022 on 15 December 2022 (the “Act”) we now have a clearer picture of what the Concrete Levy involves. In this article we analyse the impact of the Concrete Levy on the construction sector in Ireland.
The introduction of the Concrete Levy by the Government emanated from the need to finance a redress scheme for those homeowners affected by the issue of defective products that have been used in the building of their homes. The Remediation of Dwellings Damaged by the use of Defective Concrete Blocks Act 2022 puts in place a statutory framework for the provision of grants to homeowners across Ireland whose homes were built using defective products such as concrete blocks that contain excessive amounts of the chemicals known as mica or pyrite. Revenues raised from the Concrete Levy will finance the provision of grants under this redress scheme.
The Government’s Climate Action Plan 2021 notes that the use of cement (used in concrete) is “extremely carbon-intensive” and that an evolution in the construction sector is required in order to decarbonise the Irish economy with a focus on using alternatives to concrete such as timber. The introduction of the Concrete Levy could be seen as a policy tool to effect this move to a low-carbon construction sector in Ireland.
When will the Concrete Levy be commenced?
The Concrete Levy was initially flagged in the Minister for Finance’s budget speech as being applicable from 3 April 2023, however this was deferred. Whilst the section of the Act dealing with the Concrete Levy has not yet been commenced (and therefore the tax is not yet payable) the Act provides that it will be applicable to the first supply of a concrete product on or after 1 September 2023.
The Chargeable Person
The person who will be liable for the payment of the Concrete Levy is the person who makes “the first supply of a concrete product – i.e.: at that point where a person:
(a) transfers the ownership of a concrete product by agreement or sale; or
(b) assigns a concrete product for use in business other than by way of agreement or sale; or
(c) a concrete product is given for the private use or use of concrete in the course of a business in the State.
In summary, liability for payment of the Concrete Levy will rest with the person (be it a private individual or a company) that first supplies a concrete product (the “Chargeable Person”) to another person. The liability will run from the date on which the concrete product is first supplied.
If a Chargeable Person fails to pay the Concrete Levy that becomes due on a ‘supply date’ they will be liable to pay the outstanding Concrete Levy along with a penalty of up to €4,000.
Information to be provided by the Chargeable Person
Upon making a first supply of a concrete product, a Chargeable Person must provide the following information to the person receiving the concrete product:
- the amount of the Concrete Levy that is payable on the first supply of the concrete product;
- the date on which the concrete product is first supplied;
- the name of the Chargeable Person (except when they supply a concrete product in the manner described in points (b) and (c) above).
A Chargeable Person who fails to provide the above information to anyone it first supplies a concrete product to will be liable for a penalty of up to €500 for each such failure.
How to calculate the Concrete Levy
The following formula can be used to calculate the amount payable by a Chargeable Person:
The open market value of the concrete product on the supply date X 5% = amount payable
By way of illustration, if a pallet of concrete blocks were to cost €100 then the amount of Concrete Levy payable would be €5.
Registration and filing requirements
There will be an obligation for every Chargeable Person to register with the Revenue Commissioners prior to making a first supply of a concrete product. A self-assessed return will then need to be filed with the Revenue Commissioners within 23 days after the end of each ‘accounting period’. Failure of a Chargeable Person to file a return to the Revenue Commissioners will be liable for a penalty of up to €4,000.
A Chargeable Person will be obliged to maintain records relating to the Concrete Levy for a period of 6 years. The records to be maintained will include (but are not limited to) books, accounts, documents and any other data maintained manually or by any electronic, photographic or other process relating to the first supply of a concrete product. This could include any of the following:
Such records have to be retained even where the Chargeable Person is a company that has been wound up or dissolved. In such circumstances either:
- a liquidator; or
- where a company has been dissolved without the appointment of a liquidator, then the last directors of the company,
will be obliged to retain the records for 5 years from the date the company is wound up or dissolved. Failure by a Chargeable Person to maintain such records will mean they are liable for a penalty of €3,000.
Potential impact on the construction sector
As stated above, the Concrete Levy was originally due to apply from April 2023 but at a rate of 10% rather than the current 5% rate. The deferral of the implementation of the Concrete Levy and the reduction in the rate chargeable per concrete product is perhaps a recognition of the hyperinflation that has occurred in the construction sector in recent times. Nonetheless, the Concrete Levy will undoubtedly have an impact on the cost of many construction projects once implemented.
‘Accounting period’ means the period from 1 September 2023 to 31 December 2023 and thereafter a period of 6 months, the first such period beginning on 1 January 2024.
‘Concrete’ is defined in the Act as meaning 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. A ‘concrete product’ has two possible definitions under the Act:
(a) a product that:
- contains concrete; and
- is of a type that is required to comply with the Harmonised European Standard for specification for masonry units (further information on which can be found in the Act).
(b) a product that is concrete and ready to pour and that VAT is applicable to for the purposes of the Value-Added Tax Consolidation Act 2010, as amended;
If you would like further information regarding the Concrete Levy our construction law team is always on hand to assist along with our multi-disciplinary teams such as the procurement, planning and housing groups.
Article written with the assistance of associate Shane Kelly.