Tax Code

Dáil Éireann Debate, Wednesday - 17 January 2024

Wednesday, 17 January 2024

Ceisteanna (315, 329, 338, 341, 342, 366)

Danny Healy-Rae

Ceist:

315. Deputy Danny Healy-Rae asked the Minister for Finance for an update on a matter (details supplied); and if he will make a statement on the matter. [56600/23]

Colm Burke

Ceist:

329. Deputy Colm Burke asked the Minister for Finance if his Department will engage with the Revenue Commissioners in respect of a different approach now being adopted by the Revenue Commissioners regarding the VAT 58 refund claims by non-VAT registered farmers (details supplied); and if he will make a statement on the matter. [56894/23]

Danny Healy-Rae

Ceist:

338. Deputy Danny Healy-Rae asked the Minister for Finance if he will provide an update on a matter (details supplied); and if he will make a statement on the matter. [57387/23]

Mattie McGrath

Ceist:

341. Deputy Mattie McGrath asked the Minister for Finance the reason for the change to the refund of VAT for unregistered farmers; if this change will be reversed immediately; and if he will make a statement on the matter. [1026/24]

Emer Higgins

Ceist:

342. Deputy Emer Higgins asked the Minister for Finance to provide details of the amount of money claimed by the agricultural sector in VAT 58 reclaims annually for the past ten years; and if he will make a statement on the matter. [1051/24]

Claire Kerrane

Ceist:

366. Deputy Claire Kerrane asked the Minister for Finance if consideration has been given to addressing issues arising in relation to VAT refunds for farmers; if he has engaged with representatives from the agriculture sector on finding a solution; and if he will make a statement on the matter. [1621/24]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 315, 329, 338, 341, 342 and 366 together.

The 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 each farmer’s decision on this matter affects how VAT incurred on their inputs (such as the purchase of farm equipment) is treated.

Farmers who elect to register for VAT are – like any VAT-registered business – obliged to account for VAT on their supplies and, equally, are entitled to claim a deduction for VAT incurred on inputs used by the business.  Therefore, VAT-registered farmers are entitled to reclaim the VAT incurred on farm equipment, including, for example, milk bulk tanks, calf feeders, meal bins and milking parlour equipment about which one of the Deputies has asked.  The claim is made through the farmer’s normal VAT return.

Alternatively, under VAT law, farmers can decide not to register for VAT, and to avail instead of the Flat-rate Farmers Scheme which applies to VAT-unregistered farmers.  As is normal for VAT-unregistered businesses, unregistered farmers are not entitled to reclaim VAT incurred on the various individual inputs used in their farming business.  However, uniquely for the farming sector, the Directive permits a special arrangement – known as the Flat-Rate Farmer’s Scheme – which compensates unregistered farmers for the overall VAT incurred by their sector.  The Scheme is designed as an administrative simplification measure to enable 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 VAT registration and filing.  The Scheme allows unregistered farmers to add and retain 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.  Each year, the level of the flat-rate percentage is reviewed and, if needed, re-set under law, in order to ensure that the Scheme continues to allow appropriately for the unregistered farming sector to be fully compensated, on an overall basis, for the VAT it incurs.

Generally, businesses that are not registered for VAT are not permitted to reclaim any VAT they incur.  However, in addition to the compensation for VAT-unregistered farmers provided by the Flat-rate Scheme, Irish VAT law also permits flat-rate farmers to reclaim VAT they incur on some particular business expenditure, as set out in the Value-Added Tax (Refund of Tax) (Flat-rate Farmers) Order 2012 (S.I. No. 201/2012).  The Refund Order is permitted under EU law, subject to certain conditions, including that its scope is not extended.  The Order allows unregistered farmers to claim refunds for VAT incurred on the following farming business expenditure:

the construction, extension, alteration or reconstruction of farm buildings or structures;

the fencing, draining or reclamation of farmland; and

the construction, erection or installation of qualifying equipment for the micro-generation of electricity for use in the farm business.

Expenditure incurred by flat-rate farmers on any other farming business inputs, such as farm equipment, does not come within the scope of the Refund Order.  Farm equipment which is outside the scope of the Order would include milk bulk tanks, calf feeders, meal bins and milking parlour equipment about which one of the Deputies is asking. However, where the installation of farming equipment requires the alteration or reconstruction of a farm building or structure, the corresponding expenditure may be allowed in certain circumstances.

I understand from Revenue that claims by unregistered farmers for refunds under the Order are made on a self-assessment basis.  Claimants should satisfy themselves that any claim complies with the Refund Order.  As is normal for self-assessed taxes and schemes, claims received are risk-assessed for review by Revenue. Each reviewed claim is assessed on its own merits.  Claims that do not comply with the order cannot qualify for a refund of the VAT.  Where a VAT refund is refused by Revenue, a farmer can appeal the decision 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.

Revenue have confirmed that they have not changed their interpretation of the law on the Refund Order.  In recent times, though, their risk-assessment of claims has identified ineligible claims for the refund of VAT on various types of farm equipment, which is outside the scope of the Refund Order.  Revenue’s refusal of such ineligible claims has led to queries from the farming and the farm equipment sectors.

My Department and Revenue are engaging with the farming sector to explain the situation in relation to the law and the claims process.  In December, they met the Irish Creamery Milk Suppliers Association (ICMSA) and are shortly due to meet the Irish Farmers Association (IFA). I trust that these meetings will assist in clarifying the matter and addressing the concerns of the sector. Revenue have also confirmed that updated guidance will be published shortly after engagement with the sector so that further information will be available on the Refund Order.

The following table sets out the amount of VAT refunded by Revenue to unregistered farmers under the Refund Order in each of the last 10 years:

Year	No. of Claims	VAT Refunds
2023	35,896	€88m
2022	35,948	€89.3m
2021	36,243	€85.7m
2020	37,176	€80m
2019	35,517	€71.1m
2018	21,947	€76.1m
2017	20,537	€59.5m
2016	23,055	€56.3m
2015	21,151	€54.9m
2014	21,227	€50.9m