I am advised by the Revenue Commissioners that the majority of agricultural services are in fact liable for VAT at the reduced rate of 12.5 per cent.
Agricultural services qualifying for the reduced VAT rate include field work such as reaping, mowing, sowing and planting etc.; stock-minding and rearing; disinfecting and ensilage of agricultural products; destruction of weeds and pests and dusting and spraying of crops and land; lopping, tree felling and similar forestry services, and farm relief services and farm advisory services.
I am further advised that the combined supply and sowing-planting of seeds-plants etc. for the production of food is zero rated for VAT purposes, as is the combined supply and spreading of fertilisers.
Certain other services availed of by the agricultural sector such as accountancy services, transport and storage, are liable at the standard rate of 21 per cent. This is also the rate applicable to such services when supplied to the non-agricultural sectors. To extend the application of the 12.5 per cent rate to those services when supplied to farmers would be inequitable as it would be contrary to the principle that similar goods and services should be treated in like manner for VAT purposes.
A farmer who is registered for VAT in respect of his farm business is entitled to claim credit on his VAT return for all VAT incurred on his purchases in relation to the business, in the same way as is any other VAT registered person.
A farmer who is not registered for VAT and who is therefore not entitled to obtain credit for the VAT he has paid on his purchases is compensated for this by payment of a flat-rate addition of 2.5 per cent to the price he receives for all his agricultural produce and services sold to VAT registered persons.
