Tax Code

Dáil Éireann Debate, Thursday - 1 February 2024

Thursday, 1 February 2024

Ceisteanna (94, 102, 122, 143, 147)

Michael Moynihan

Ceist:

94. Deputy Michael Moynihan asked the Minister for Finance the plans he has to review the VAT treatment of farmers; and if he will make a statement on the matter. [4278/24]

Brendan Smith

Ceist:

102. Deputy Brendan Smith asked the Minister for Finance if it is proposed to amend the VAT refund regulations as applicable to farmers to ensure the continuation of the system that existed up to recently; and if he will make a statement on the matter. [4624/24]

Cathal Crowe

Ceist:

122. Deputy Cathal Crowe asked the Minister for Finance if he will urgently consider making a revision to the flat rate of VAT, applicable to farmers, so that rebates can be provided on certain farm infrastructural investments; and if he will make a statement on the matter. [4246/24]

Pearse Doherty

Ceist:

143. Deputy Pearse Doherty asked the Minister for Finance if he is aware of Revenue no longer accepting certain items of expenditure for the construction, extension, alteration or reconstruction of farm buildings or structures with respect to VAT refunds for unregistered farmers; if he has engaged with Revenue on this issue; and if he will make a statement on the matter. [4621/24]

Brendan Smith

Ceist:

147. Deputy Brendan Smith asked the Minister for Finance if he will ensure that the concerns of farmers in relation to changes to VAT refunds are given urgent and detailed consideration; and if he will make a statement on the matter. [4623/24]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 94, 102, 122, 143 and 147 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.

Under VAT law, farmers can avail of the Flat-rate Farmers Scheme and remain unregistered for VAT. 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. The flat rate addition is currently set at 4.8%, effective since 1 January 2024.

However, in addition to the compensation for flat-rate 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 2012 Refund Order. The Refund Order is permitted under EU law, subject to certain conditions, including that its scope is not extended. This means that the order may not be altered to permit refunds of VAT incurred on farming business costs that are not currently provided for in the order.

However, where the installation of farming 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 or structure or to the equipment itself. Revenue have outlined already to the sector that they have demonstrated a significant amount of flexibility in relation to the administration of the refund order, considering the context and nature of the claims that are made, and allow, for example, VAT repayments claims for milk parlours, if part of a new build / construction.

I understand from Revenue that claims by flat-rate 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. 

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 are 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. Revenue is happy to further engage with the sector in clarifying the matter and has invited the ICSMA and IFA to make submissions in this regard. Revenue will then publish updated guidance shortly once it has received and considered those submissions.