Dáil Éireann Debate, Wednesday - 13 December 2023
71. Deputy Brendan Griffin asked the Minister for Finance the reason repayment of VAT on milk tanks for unregistered farmers has been withdrawn by the Revenue Commissioners without any notice; if milk tanks will be reinstated in the unregistered farmers VAT scheme; and if he will make a statement on the matter. [55754/23]
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, and this affects how VAT incurred on their inputs (such as the purchase of bulk milk tanks) is treated.
I understand that Farmers who elect to register for VAT are obliged to account for VAT on their supplies and are entitled to claim a deduction for VAT incurred on inputs used for the purposes of their taxable supplies. Therefore, VAT-registered farmers would be entitled to reclaim the VAT incurred on bulk milk tanks, and this should be done through their normal VAT returns.
Alternatively, farmers can remain unregistered for VAT and opt for the Flat-Rate Farmer’s Scheme. The Scheme is a simplification arrangement permitted under the Directive. It is designed to reduce the administrative burden for farmers by allowing unregistered farmers to be compensated on an overall basis for VAT on inputs, while remaining outside the VAT system, thereby avoiding the burdens associated with registration and filing. It allows such farmers to add a percentage charge (known as the “flat-rate addition”) onto the amount they invoice VAT-registered businesses (e.g. co-ops, meat processors, etc.) whom they supply with agricultural goods and services in the course of their farming business. Unlike VAT-registered businesses, unregistered farmers are not entitled to a deduction for VAT incurred on individual inputs used in their farming business; instead, the Flat-rate Scheme permits them to charge and retain the flat-rate addition in order to compensate them, on an overall basis, for the VAT across all their inputs.
I understand that there are certain limited situations in which flat-rate farmers are specifically permitted to claim a refund of the VAT incurred by them on particular inputs. The Value-Added Tax (Refund of Tax) (Flat-rate Farmers) Order 2012 (S.I. No. 201/2012) allows for refunds to be claimed on outlay incurred on:
- the construction, extension, alteration or reconstruction of a farm buildings or structures;
- the fencing, draining and reclamation of farmland; and
- the construction and/or installation of qualifying equipment for the purpose of micro-generation of electricity for use in a farm business.
I am advised by Revenue that on this basis, outlay incurred by flat-rate farmers on the installation of milk tanks has been allowed in certain circumstances where their installation is considered to constitute an alteration or reconstruction of a farm building or structure. Otherwise, outlay incurred on milk tanks is not allowable. Given the range of milk tanks available, each application needs to be considered on a case-by-case basis, having regard to the size of the tank and the level of structural works required for the installation in a farm building.
