Minister for Finance Paschal Donohoe has made the decision to remove the poultry broiler sector from the VAT Flat Rate Addition scheme from September 1.

The Department of Finance said the minister made this decision based on advice provided by the Revenue Commissioners and the department that "overcompensation" is occurring within the broiler sector (which raises chickens for meat, as opposed to the laying sector where chickens are raised for egg production).

The flat-rate addition scheme compensates farmers who are not VAT registered for the VAT incurred by them on input costs used in the course of their farming activities.

This is achieved through the addition of a flat-rate percentage (currently 5.1%) to the price charged by the farmer for their supplies to a VAT-registered entity, such as a meat processing business, or, in the case of dairy farmers, a milk processor.

The use of a flat-rate scheme for farmers is provided for under EU legislation. However, a key element of the scheme is that it should not lead to a situation where farmers are overcompensated for VAT incurred by them on their business costs.

Following an investigation in 2018, the department said that Revenue had determined that there was a significant amount of overcompensation occurring in the poultry sector.

The matter has subsequently been re-examined over the last 18 months and it has been determined that overcompensation is still occurring, the department said; resulting Minister Donohoe’s decision to remove the sector from the scheme.

From September 1, 2025, farmers in the poultry broiler sector will not be able to charge the flat rate addition on the sale of their goods and services.

Instead, they will be required to register for VAT if the level of their poultry broiler business is above the relevant VAT registration threshold in order to claim back VAT on their inputs. Farmers operating below this threshold can optionally register for VAT.

The VAT registration thresholds are €42,500 for services and €85,000 for goods.

The Department of Finance cited figures from the Irish Farmers' Association (IFA) suggesting that some 600 farms, including mixed-sector farms, will be impacted by Minister Donohoe's decision.

Commenting on his decision, the minister said: "This has been a difficult decision to make; however, in my role as Minister for Finance I am required to have regard for the welfare of all farmers who avail of the scheme.

Minister Donohoe added: "I understand the concern this will cause among impacted farmers and want to emphasise that every effort was made to find a resolution for our poultry sector. However, this matter has come to a head and must be addressed.

The minister said he has asked Revenue "to provide the appropriate level of assistance and guidance on this matter to the affected farmers".

The Department of Finance said that impacted farmers with queries on this issues can direct them to Revenue.