Dáil Éireann Debate, Thursday - 30 November 2023
314. Deputy Paul Kehoe asked the Minister for Finance if there has been a change in policy in respect VAT treatment for farmers purchasing fixed equipment for their farm (details supplied); if he will explain the inconsistencies and give a clear direction going forward; and if he will make a statement on the matter. [53033/23]
View answerThe VAT treatment of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In accordance with the EU VAT Directive, farmers can elect whether or not to register for VAT in respect of their farming business.
I understand that farmers who register for VAT have an entitlement to reclaim VAT on costs incurred in relation to their agricultural business. A farmer who has elected to register for VAT and charges VAT on their supplies can claim a deduction for VAT incurred on costs that are used for the purposes of their taxable supplies. A VAT-registered farmer would be entitled to reclaim VAT incurred on farm equipment such as calf feeders, collars and equipment used to monitor the health of cattle.
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 law 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 allows such farmers to charge and retain a “flat-rate addition” onto the amount that they charge for the agricultural goods and services they supply in the course of their farming business. The flat-rate addition is calculated as a percentage of the amount payable to the farmer and is based on the commercial agreements between the farmer and customer. The scheme is designed to reduce the administrative burden on farmers and allows them to remain outside the normal VAT system, thereby avoiding the obligations of registration and returns.
Unregistered farmers may also be able to avail of a VAT refund on certain expenses allowed for under the Value-Added Tax (Refund of Tax) (Flat-rate Farmers) Order 2012 (S.I. No. 201/2012) (“VAT refund order”). The VAT refund order allows for refunds to be claimed on outlay 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 micro-generation of electricity for use in a farm business. Outlay for other purposes, such as on the acquisition of calf feeders, collars and equipment used to monitor the health of cattle, do not come within the scope of the refund order.
I am advised by Revenue that, where the installation of calf feeders requires the alteration or reconstruction of a farm building or structure, the corresponding outlay has been allowed in certain circumstances. In addition, outlay on drafting gates that may from part of a system used to monitor the health of cattle may be considered fencing under the Order, and has been allowed in certain circumstances where outlay on the other components of the system has not been allowed.
Revenue has not changed their 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 for a refund of the VAT.
