Farmers should be aware of some key changes that are due to come in next year in relation to the flat-rate top-up and certain reliefs.

As announced in Budget 2026, the farmer's flat-rate addition for 2026 will be 4.5%, down from 5.1% in 2025.

This change will take effect from January 1.

The flat-rate scheme is for farmers who are not registered, or required to register, for VAT.

The scheme is designed to compensate farmers for the VAT they incur on farming costs without having to register.

The majority of farmers are not registered for VAT.

'Hugely disappointing' flat-rate change

Chairperson of Irish Creamery Milk Suppliers' Association (ICMSA) farm business committee, Pat O'Brien, expressed his "disappointment" over the change to the flat-rate.

“The move from 5.1% to 4.5% is hugely disappointing and the data and calculation behind this decision should be published in full," O'Brien told Agriland.  

"Their treatment by Revenue - particularly the inability to reclaim VAT on essential equipment like calf feeders amongst other items - remains a serious thorn in our side and is simply unfair.

"Government has attempted to pass this decrease off as something outside its control because it stems from an EU Directive and is linked to a formula based on projected outputs.

"But that simply doesn’t wash - the notion that this formula is neutral is hard to swallow."

'Massive'

O'Brien said action is needed from policymakers.

“The reality is that farmers live off the margin," the farm business committee chairperson said.

"A 0.6% reduction may seem trivial to those outside the sector, but in an industry that frequently operates below the cost of production, it is absolutely massive.

He added that the changes in recent years to the items eligible for a VAT refund has been a "hugely retrograde step" and should be reviewed immediately.  

"Farmers are expected to move with the times and so should the VAT system," O'Brien added.

Livestock sales

The Irish Co-operative Organisation Society (ICOS) has also raised concerns recently about the decision by the Department of Finance to reduce the flat-rate top-up.

ICOS said that where livestock sales are subject to the statutory 4.8% VAT rate, the lower 4.5% flat-rate addition will "create a shortfall that did not previously exist, resulting in unequal treatment for farmers as they sell their animals".

ICOS said it acknowledges that the flat-rate addition is calculated in line with EU VAT law.

However, the co-op representative body is concerned that the interaction between the revised rate and existing VAT rules has produced an "unintended and inequitable outcome" for non-VAT registered farmers.

"The flat-rate scheme is meant to be simple, neutral and fair for farmers who are not VAT-registered," Ray Doyle, livestock and environmental executive of ICOS said.

"This change creates an anomaly where full VAT compensation is no longer achieved in all cases.

"It may not sound like much for a single sale but it will all add up to several million euro of a loss for the sector when you take into account the overall sales volumes of livestock in Ireland.

"That was never the intention of the scheme, and it needs to be addressed before the new rate comes into force."

Reliefs

Separately, here are a number of reliefs that were due to expire in 2025 and have been extended.

The Farm Consolidation (Stamp Duty) relief, Farm Restructuring (Capital Gains Tax) relief and the Young Trained Farmer (Stamp Duty) relief have been extended to the end of 2029.

An extension of the accelerated capital allowance scheme for slurry storage facilities for four more years has also been confirmed.

The Capital Gains Tax Restructuring Relief has been extended to the end of 2029.

Stock Relief for Registered Farm Partnerships and Stock Relief for Young Trained Farmers are both in place until December 31, 2027.

General Stock Relief, which is available to all farmers at the 25% rate, is also in place until December 31, 2027.