Contractors seek VAT revamp and national register to tackle ‘black economy’

To counter “significant black economy issues” and cash-flow challenges facing (farming) customers in the agricultural contracting sector, the Government must consider two possible options – to reduce VAT on services provided by contractors.

This is just one of 10 key points in the 2020 Pre-Budget Submission from the Association of Farm Contractors in Ireland (FCI).

The two VAT-related options (as proposed by the FCI) are:
  • Reduce VAT on all agricultural contractor services from 13.5% to 9%, for a minimum trial period of two years. This would allow the wider agricultural sector to benefit from improved cash-flow and would facilitate farmer re-investment in additional higher genetic worth dairy and beef animals.
  • Alternatively, introduce a special short-term (two-year) provision to allow farmers to avail of a full VAT refund on all invoiced activities by agricultural contractors, in a similar way to the operation of the VAT-refund system on farm buildings and land drainage works. This would create welcome opportunities for the agricultural sector – against the backdrop of Brexit.

The other nine key points in the FCI’s submission are listed (and detailed) below:

National Register of Farm/Forestry Contractors:

The Minister for Finance and Public Expenditure and Reform should instruct the Revenue Commissioners to establish a National Register of Farm/Forestry Contractors.

This register would be based on criteria to be agreed between the Revenue Commissioners and the FCI.

Accelerated Investment Allowances:

Registered contractors should be allowed to avail of Accelerated Investment Allowances (AIAs) to enable investment in high capital cost machinery (proven to deliver greater fuel economy and lower CO2 emissions).

Some expensive machines have a relatively short working life (i.e. three to five years in typical Irish conditions). Alas, the current write-down period is eight years.

Form 11 – Tax Return and Self-Assessment:

An amendment should be introduced to the annual Form 11 – Tax Return and Self-Assessment form to include a section whereby farmers would be required to provide a detailed breakdown of their annual (agricultural) diesel usage costs – under a new and separate heading.

This would highlight fuel usage that’s out of proportion with the scale of the farming activities thus, in turn, creating a more level business environment for registered contractors.

Income Tax Incentive or Special Seasonal Machinery Skills Allowance Scheme:

There’s an urgent need for a seasonal Income Tax Incentive or Special Seasonal Machinery Skills Allowance Scheme to allow farmers’ sons and daughters to work with locally-based contractors during the seasonal summer months and to then revert back to farm work during the winter period.

Green Low-Carbon Agri-environment Scheme:

The Minister for Finance and Public Expenditure and Reform should provide funding for the extension of the Green Low-Carbon Agri-environment Scheme (GLAS) to all farmers in the form of the current voucher worth €1.20/m³, where the slurry is spread by contractor-invoiced Low Emission Slurry Spreading (LESS) systems.

This would ensure more efficient use of the state’s investment and ensure that a national LESS record is created and managed.

Carbon tax rebate for contractors:

Agricultural contractors are not currently eligible for a carbon tax rebate (write-off), even though all of their work activities are for farmers.

The FCI is requesting that contractors that are registered with the Revenue Commissioners (and employ a minimum of four full-time machine operators) should be facilitated in such a measure.

Grass-based bio-digester sector:

The Minister for Finance and Public Expenditure and Reform should, through the offices of the Minister for Communications, Climate Action and Environment, provide support for the establishment of a grass-based bio-digester sector in Ireland.

3-year apprenticeship programme:

A dedicated agricultural/forestry contractor (tractor operator) three-year apprenticeship programme should be created, along similar lines to that available in the road haulage sector.

Daily (tax-free) meal allowance for all operators:

Agricultural/forestry contractors, that are registered with the Revenue Commissioners, should be allowed a daily (tax-free) meal allowance for all operators – in a manner similar to that available to the road haulage industry.

This is because contractors’ teams now rarely get fed on farms on which they are working.