Dáil Éireann Debate, Tuesday - 27 February 2024
142. Deputy John McGuinness asked the Minister for Finance if an application for a refund of VAT relative to the purchase of a milk tank under TAMS 2, which was rejected by the Revenue Commissioners, will be examined again and paid in full to a person (details supplied); and if he will make a statement on the matter. [8832/24]
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 farm equipment) is treated. Eligibility for grant funding under the Targeted Agricultural Modernisation (TAMS) scheme has no bearing on, nor interaction with, the application of VAT law, including The Value-Added Tax (Refund of Tax) (Flat-rate Farmers) Order 2012 (S.I. No. 201/2012).
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 farm equipment, including milk bulk 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. This 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 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.
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 refunds to be claimed on outlay incurred on:
- the construction, extension, alteration or reconstruction of 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.
Outlay incurred by flat-rate farmers on the acquisition of equipment does not come within the scope of the refund order. However, where the installation of the equipment requires the alteration or reconstruction of a farm building or structure, the corresponding expenditure on the alteration or reconstruction of the building or structure, including equipment or elements of equipment permanently installed in the farm building or structure, may be allowed in certain circumstances. The equipment must be permanently installed in the farm building or structure and, once installed, cannot be removed without causing significant damage or destruction to the farm building/structure or to the equipment itself.
The claim in question (details supplied) refers solely to outlay on the purchase of a milk tank, and no works to alter or reconstruct the building were evident in the claim. Consequently, the claim was refused on the basis that the outlay being claimed does not come within the scope of the Refund Order. Claims that do not comply with the order cannot qualify for a refund of the VAT.
Should the claimant remain aggrieved by this decision, he may appeal it to the Tax Appeals Commission, which is an independent statutory body that hears and determines appeals against assessments and decisions of the Revenue Commissioners, including decisions to refuse claims under this Refund Order.
