It will be “impossibly expensive” for some dairy farmers to invest in purchasing bulk milk tanks and calf feeders if they are not eligible for a VAT rebate, the Irish Creamery Milk Suppliers’ Association (ICMSA) has warned today (Thursday, November 30).
The farming organisation said that certain farmers who want to invest in “better equipment aimed at long-term sustainability” would now have to write-off the expenditure over seven years, instead of getting the VAT “rebate within three weeks – as was the previously the case”.
The ICMSA president, Pat McCormack, believes a decision to “scrap” a VAT rebate on bulk milk tanks, calf feeders and other items is “deliberately damaging”.
He also accused the government of “undermining” the dairy farming sector, and removing “a practical support to dairy farmers investing in their farms”.
According to the minister for finance in accordance with the EU VAT directive, farmers can elect whether or not to register for VAT in relation to their farming business.
“Farmers who register for VAT have an entitlement to reclaim VAT on costs incurred in relation to their agricultural business.
“A farmer who has elected to register for VAT and charges VAT on their supplies, can claim a deduction for VAT incurred on costs that are used for the purposes of their taxable supplies,” Minister Michael McGrath previously told the Dáil.
VAT registered farmers
According to the minister, a VAT registered farmer would “be entitled to reclaim VAT incurred on computerised calf feeders through their VAT returns.
However, farmers can also choose to remain unregistered for VAT purposes, and opt for the Flat Rate Farmer’s Scheme.
Minister McGrath said that VAT law allows farmers who remain unregistered for VAT purposes “to be compensated on an overall basis for the VAT charged to them on their purchases of goods and service.”
“It allows such farmers to charge and retain a flat-rate addition onto the amount that they charge for the agricultural goods and services they supply in the course of their farming business.
“The flat-rate addition is calculated as a percentage of the amount payable to the farmer and is based on the commercial agreements between the farmer and customer,” he added.
The minister also said that unregistered farmers may also be able to avail of a VAT refund on certain expenses allowed under other measures.
“The VAT refund order allows for refunds to be claimed on outlay incurred on the construction, extension, alteration or reconstruction of a farm building or structure, on fencing, draining and reclamation of farmland, and the construction of qualifying equipment for the purpose of micro-generation of electricity for use in a farm business.
“Revenue advise that outlay for other purposes, such as computerised calf feeders, does not come within the scope of the refund order,” the minister told the Dáil.