Farming organisations are calling for clarity from the Department of Finance on the current position regarding farmers and value added tax (VAT) refunds.
There has been a level of confusion in recent weeks over whether unregistered farmers can avail of VAT refunds.
It has been claimed that some farmers and manufacturers have been left with “large loans” because of the unclear position in relation to the issue.
According to the Irish Farmers Association (IFA), farmers have made capital expenditure investments to increase their farm efficiency and sustainability on the basis that they would qualify for a VAT refund.
However the IFA stated that some farmers who have made these investments have then discovered that they “no longer qualify” for the refund.
The association has raised this issue with banks and other lending institutions.
Meanwhile Revenue has stated that it has not changed its approach to the refund order, and highlighted that each claim “is assessed on its own merits”.
Revenue
According to Revenue, unregistered farmers may be able to avail of a VAT refund on certain expenses allowed under the VAT refund order.
The VAT refund order allows for refunds to be claimed on unavoidable expenses on the construction, extension, alteration or reconstruction of farm buildings or structures.
This includes: fencing; draining and reclamation of farmland; and the construction and/or installation of qualifying equipment for the purpose of microgeneration of electricity for use in a farm business.
Revenue have confirmed to Agriland that the refund order does not provide for relief from VAT on the purchase of “movable goods” such as farm machinery.
VAT confusion
So where is the confusion coming from, and why are farmers feeling the impact if there’s been no change in legislation?
IFA farm business executive, Karol Kissane, explained that while the legislation did not contain the word “fixed” there was an implied “understanding” that once the item was fixed, farmers would get the VAT back.
He also explained that in the last two to three months, Revenue has taken a “more literal meaning of the legislation”.
“There have been no changes by the law or government, it’s purely based on Revenue’s interpretation,” Kissane said.
He said that he was advised by Revenue that if a farmer can remove an item and sell it, then a VAT refund would not be available.
“Now the issue there is, milking parlours are sold second hand,” Kissane said.
He said there were no cases highlighted to date of a farmer unable to get VAT back on a milking parlour, but that there were issues with getting VAT back on milking equipment, such as bulk tanks.
“What good is building a dairy building if there’s no bulk tank?
“It doesn’t work without a bulk tank. You can’t have a milking parlour without a bulk tank to store the milk.
“So there’s these things that actually are fundamental to the ability of a building to operate in agriculture,” Kissane said.
What’s next?
Kissane said that he has received calls from farmers who have made large purchases without realising they would be unable to receive VAT back.
He added that he has also been contacted by manufacturers who are worried from a “business point of view” that because there is uncertainty around what qualifies for a VAT reclaim, this could put farmers off making big purchases.
He said that the IFA is now working with the Department of Finance to see if there could be a change to the legislation.
The IFA is also in discussions with the Department of Agriculture, Food and the Marine (DAFM) over what Kissane described as “underfunding” to the Targeted Agricultural Modernisation Scheme (TAMS).
The IFA is waiting to hear back from the Minister for Agriculture, Food and the Marine Charlie McConalogue, in relation to a meeting it requested on October 27.
The Irish Creamery Milk Suppliers Association (ICMSA) has also confirmed to Agriland that it will meet with Revenue next Tuesday (December 12) to discuss possibilities for a change in legislation.