The Taoiseach and minister for finance have been asked to intervene after farmers found they can no longer reclaim or get a refund on Vat for several essential farm items.
Farmers all over the country who are unregistered for Vat say there has been a sudden, unannounced change by Revenue on the refund of Vat at 23% for such items as meal bins, milk bulk tanks, automatic calf feeders, milking parlour equipment, automatic scrapers, and slurry bags.
Taoiseach Leo Varadkar said it is a matter for the Revenue Commissioners, and referred the matter to the minister for finance after independent Tipperary TD Mattie McGrath raised it in the Dáil.
Mr McGrath warned issue could break some farmers.
Essential farm items
Tipperary Fianna Fáil TD Jackie Cahill also told the Dáil that farmers who are unregistered for Vat have always been able to reclaim Vat for infrastructural projects on their farms. But in the past couple of months, Revenue has started to exclude items from that list - for example, slurry bags, automatic calf feeders, bulk milk tanks, and automatic scrapers.
“It completely changes the Vat treatment for farmers unregistered for Vat. I request that the Government open dialogue with Revenue to get these decisions reversed. If they are not reversed, the whole issue of the Vat rebate rate for farmers, which is currently set at 4.8%, has to be revisited,” he said.
Cork South-West Fianna Fáil TD Christopher O’Sullivan added that there were several essential farm items for which farmers can no longer reclaim or get a refund on Vat.
He said farmers are trying to invest multiples of thousands of euro into their farms to make them more efficient and sustainable.
“Now, however, they essentially are being penalised for that because they can no longer claim back Vat on items when they were once able to do so, in many cases, at a Vat rate of 23%”.
Young farmers
He warned many young farmers, in particular, getting bulk tanks installed or with planning permission and contractors ready to go, may already have sorted out bridging loans in the full expectation that they would get this Vat refund.
“In some instances, this is coming to €40,000 or €50,000 or even more”, he said, explaining that the farming sector has been “dealt blow after blow” in recent months.
“I do not see why the Revenue Commissioners are hell-bent on penalising these farmers... We celebrated that the new TAMS ceiling goes to €80,000. This completely erodes any benefit of that for most of these farmers”.
EU law
The Vat treatment of goods and services is subject to EU Vat law, with which Irish Vat law must comply. Farmers can elect to register for Vat and charge Vat on outputs, and claim Vat on costs.
A Vat-registered farmer would be entitled to reclaim Vat incurred on a range of items, including new farm buildings and structures, as well as farm equipment such as feed bins, milk tanks, automatic calf feeders, milking equipment, automatic scrapers, as well as farm machinery such as tractors, balers, etc., and Vat on running costs, such as agricultural diesel and energy. In general, registered farmers are in a net repayment position for Vat.
Alternatively, farmers can remain unregistered for Vat purposes and opt for the flat rate farmer’s scheme. This scheme is a long-standing arrangement under EU and national Vat laws that allows farmers who remain unregistered for Vat purposes to be compensated on an overall basis for the Vat incurred on their purchases of goods and services.
It is designed to reduce the administrative burden on farmers and allow them to charge and retain a flat rate in addition to the amount that they charge for the agricultural goods and services they supply.
The flat-rate addition was reduced to 4.8%, with effect from January 1, 2024, on the amount payable to the farmer.
Unregistered farmers may also be able to avail of a Vat refund on certain expenses allowed under the Vat refund order.
Refunds
This Vat refund order allows for refunds of Vat incurred on the construction, extension, alteration or reconstruction of a farm building or structure; on fencing, draining and reclamation of farmland; and on the construction, erection or installation of qualifying equipment for the microgeneration of electricity for use in a farm business.
Vat incurred for other purposes, such as the purchase of equipment or machinery, does not come within the scope. According to the Revenue, where the installation of equipment requires the alteration or reconstruction of a farm building or structure, the corresponding outlay has been allowed in certain circumstances.
Revenue says it has not changed its approach to the refund order. Rather, each claim is assessed on its own merits. Claims that do not meet the conditions of the refund order cannot qualify.
Expanding scope of refund not possible
Replying on behalf of the government, Minister of State Malcolm Noonan said Ireland maintains the Vat refund for unregistered farmers under a historical derogation permitted by the EU Vat directive.
Expanding the scope of the refund order is not possible, and it would not be compatible with the EU Vat directive.
“At no stage has the refund order provided a basis for Ireland to issue Vat refunds to unregistered farmers regarding farm equipment.
“In the event that farmers have a query on the Vat refund order, they can contact Revenue through any of its secure online services.”
He added that where a Vat refund is refused, the decision can be appealed to the Tax Appeals Commission.
