The flat rate addition is designed to compensate non-VAT registered farmers for the VAT incurred by them on the purchases of goods and services. These farmers add this percentage to their prices when selling to VAT registered businesses that subsequently treat the flat rate addition as a normal input VAT in their periodic VAT returns.
Under the EU VAT directive, the flat rate addition is calculated using macro-economic statistics for the preceding three years. Member States are not allowed to fix a rate independently and on that basis therefore it is not appropriate to provide a detailed costing as requested by the Deputy.