The change to the interpretation of VAT rules by Revenue continues to cause problems for flat-rate farmers. These are farmers that are not registered for VAT, a category the vast majority of dairy and other livestock farmers fall into.
Prior to the change in interpretation, the general rule was that farmers could reclaim the VAT on fixed items such as farm buildings, land drainage, roadways and also plant and equipment that are fixed in nature such as milking machines, meal bins, computerised calf feeders, etc.
The guiding principle was, if it’s bolted down or fixed in concrete and not easily moved – then it’s eligible for the VAT to be reclaimed. According to Marty Murphy from ifac, Revenue first started to clamp down on VAT reclaims three years ago;
“Starting in 2022, the number of refunds being subject to review by Revenue substantially increased,” he says.
“In the same period, the number of claims being rejected substantially increased, including for items that had previously been allowed.”
Since then, there have been pledges by politicians and lobbying by farm organisations for the old system to be reinstated.
Speaking in May 2024 when he was the then Taoiseach, Tanaiste Simon Harris said he was engaging with the Minister for Finance on the topic.
“I think there needs to be absolute clarity provided in relation to this. This is an issue that has been brought up in the Dáil on many occasions and I know the Minister for Finance is giving consideration to this,” he said.
Equipment purchased without the need for construction or alteration is unlikely to qualify for a VAT reclaim.
“There hasn’t been a change, but more a change in interpretation which has caused real angst for farmers and I would like to see this clarity brought to the situation quickly.”
The IFA brought Revenue officials on a tour of a farm to see for themselves the items that they de-listed as eligible for VAT to be repaid on. More recently, members of the ICOS dairy committee organised a meeting with industry stakeholders and Revenue officials to discuss the matter.
However, as of yet the new Revenue policy has not changed. In reply to queries from the Irish Farmers Journal, Revenue clarified the position around VAT as follows:
“Where the installation of equipment requires the construction, extension, or alteration of a farm building or structure, VAT on the corresponding expenditure, including the cost of equipment that is permanently installed in the building or structure, may be allowed in certain cases.
“The equipment must be fixed or permanently attached to the farm building or structure and, once installed, must not be removable without causing significant damage to the structure or to the equipment itself,” the spokesperson said.
Revenue has published a document outlining in more detail the investments that are and are not eligible for VAT reclaim by non-VAT registered farmers. Some of the main details relating to dairy equipment are outlined here.
Meal bins
Meal bins which are fixed to the ground and in the shape of a silo are eligible for VAT reclaim according to the document;
“Feed/meal bins that qualify under the order are those which are silos e.g., elevated on a platform/legs which are permanently installed on a thick concrete base and bolted to the base.
Claimants may need to provide the description and dimensions of the silo feed/meal bin and provide photographic evidence of the structure.
The term ‘feed or meal bins’ is also used to describe portable/moveable containers and buckets which hold feed for animals. Such feed or meal bins are not refundable under the order.”
The last line calls into question whether some of the top-fill type meal bins that some farmers opt for to store meal for in-parlour feeders will be eligible for VAT reclaim.
Bulk milk tanks may qualify depending on the nature of the construction element.
Bulk tanks
Milk silos are refundable according to Revenue but they must be permanently fixed to the ground. The costs associated with erecting the milk silo and connecting it to the milking parlour are all refundable according to Revenue.
A general bulk milk tank that is not a milk silo and which is generally present in the dairy is not eligible for VAT refund. However, the Revenue document states that “where they are installed as part of a new build or reconstruction of a farm building (e.g., dairy), the VAT incurred is refundable.”
Therefore, anyone planning to build a new dairy or undertake significant work to an existing dairy to accommodate a bulk tank should be able to get the VAT back on the bulk tank. However, for a farmer looking to upgrade a bulk tank and is simply swopping in one bulk tank for another is unlikely to qualify for a refund.
An alternative option for these farmers could be to buy a milk silo, which is VAT refundable. However, milk silos are generally much larger than the standard bulk tank and so is really only an option for larger dairy farmers.
Milking parlour
The same rules apply for milking parlours as bulk tanks. That is, if “the installation of equipment requires the construction, extension, or alteration of a farm building or structure” then the VAT can be refunded.
While the Revenue document does not supply specific examples of where a claim for a milking parlour is eligible and not eligible, we can infer some things from it.
Firstly, it’s safe to say that anyone building a new milking parlour will qualify for the VAT back on the building itself and all the plant and equipment associated with the milking parlour.
However, if a farmer built a milking parlour big enough for 20 units but initially installed 16 and is now thinking of adding on four extra units without any construction element, then it is unlikely that Revenue will repay the VAT on the four extra units.
If on the other hand, the farmer with 16 units has the desire to go to 20 and the extra four units require an extension of the existing milking pit, cow stands, walls, roof and associated ground works then it is presumed that the investment meets the requirements and is therefore eligible for a VAT refund.
It’s important to note that Revenue officials will often seek photographic evidence of investments before making repayments so if undertaking a project, farmers should document each stage of the works using geotagged photographs.
Other items that are unlikely to qualify for VAT repayment include meal feeders, automatic wash units and cluster flush, if these are purchased at a later date and not part of the original build.
The reason for this is that neither require significant building construction work for installation and so are unlikely to qualify for a refund based on the Revenue guidelines which state as follows;
“Farming equipment or machinery must be permanently installed in a newly constructed/altered or extended farm building and once installed, cannot be removed without causing significant alteration, substantial damage, or destruction to the farm building or to the equipment or machinery itself.
“The impact of the alteration, damage, or destruction caused includes the part of the building the equipment or machinery is installed on and other parts of the building that could be impacted by its removal.
Installing a new auto wash unit in an existing dairy is unlikely to qualify.
“Minor changes such as items nailed, screwed, or bolted to the building walls or floor would not be considered an alteration for the purposes of the order.
“Revenue will consider the effort, time, cost, and impact on the equipment itself to determine if there is significant alteration, substantial damage or destruction of the farm building or structure or to the equipment itself.”
Drafting gate
Drafting gates and cattle crushes/handling units that are fixed in concrete will qualify for a VAT refund.
However, the electronic tags used to control drafting gates or any automated heat detection aids will not qualify for a VAT refund, according to Revenue.
Drafting gates and cattle crushes are eligible for VAT reclaim.
Future plans
According to the Revenue spokesperson who spoke to the Irish Farmers Journal this week, there are no plans to go back to the old system of VAT reclaim on all fixed items.
“There are no plans at present to publish any further updates to this guidance, but all Tax and Duty Manuals are subject to periodic review,” the spokesperson explained.
“From time to time, or as part of this periodic review process, published guidance may be updated to provide further clarity on specific topics as the need arises.”
In short
Revenue has published a guidance document on VAT reclaims for non-VAT registered farmers. The move follows on changes made by Revenue to the interpretation of what items are eligible for VAT reclaim. If milking equipment is purchased as part of a construction or alteration of a building it should be eligible for a VAT reclaim.
The change to the interpretation of VAT rules by Revenue continues to cause problems for flat-rate farmers. These are farmers that are not registered for VAT, a category the vast majority of dairy and other livestock farmers fall into.
Prior to the change in interpretation, the general rule was that farmers could reclaim the VAT on fixed items such as farm buildings, land drainage, roadways and also plant and equipment that are fixed in nature such as milking machines, meal bins, computerised calf feeders, etc.
The guiding principle was, if it’s bolted down or fixed in concrete and not easily moved – then it’s eligible for the VAT to be reclaimed. According to Marty Murphy from ifac, Revenue first started to clamp down on VAT reclaims three years ago;
“Starting in 2022, the number of refunds being subject to review by Revenue substantially increased,” he says.
“In the same period, the number of claims being rejected substantially increased, including for items that had previously been allowed.”
Since then, there have been pledges by politicians and lobbying by farm organisations for the old system to be reinstated.
Speaking in May 2024 when he was the then Taoiseach, Tanaiste Simon Harris said he was engaging with the Minister for Finance on the topic.
“I think there needs to be absolute clarity provided in relation to this. This is an issue that has been brought up in the Dáil on many occasions and I know the Minister for Finance is giving consideration to this,” he said.
Equipment purchased without the need for construction or alteration is unlikely to qualify for a VAT reclaim.
“There hasn’t been a change, but more a change in interpretation which has caused real angst for farmers and I would like to see this clarity brought to the situation quickly.”
The IFA brought Revenue officials on a tour of a farm to see for themselves the items that they de-listed as eligible for VAT to be repaid on. More recently, members of the ICOS dairy committee organised a meeting with industry stakeholders and Revenue officials to discuss the matter.
However, as of yet the new Revenue policy has not changed. In reply to queries from the Irish Farmers Journal, Revenue clarified the position around VAT as follows:
“Where the installation of equipment requires the construction, extension, or alteration of a farm building or structure, VAT on the corresponding expenditure, including the cost of equipment that is permanently installed in the building or structure, may be allowed in certain cases.
“The equipment must be fixed or permanently attached to the farm building or structure and, once installed, must not be removable without causing significant damage to the structure or to the equipment itself,” the spokesperson said.
Revenue has published a document outlining in more detail the investments that are and are not eligible for VAT reclaim by non-VAT registered farmers. Some of the main details relating to dairy equipment are outlined here.
Meal bins
Meal bins which are fixed to the ground and in the shape of a silo are eligible for VAT reclaim according to the document;
“Feed/meal bins that qualify under the order are those which are silos e.g., elevated on a platform/legs which are permanently installed on a thick concrete base and bolted to the base.
Claimants may need to provide the description and dimensions of the silo feed/meal bin and provide photographic evidence of the structure.
The term ‘feed or meal bins’ is also used to describe portable/moveable containers and buckets which hold feed for animals. Such feed or meal bins are not refundable under the order.”
The last line calls into question whether some of the top-fill type meal bins that some farmers opt for to store meal for in-parlour feeders will be eligible for VAT reclaim.
Bulk milk tanks may qualify depending on the nature of the construction element.
Bulk tanks
Milk silos are refundable according to Revenue but they must be permanently fixed to the ground. The costs associated with erecting the milk silo and connecting it to the milking parlour are all refundable according to Revenue.
A general bulk milk tank that is not a milk silo and which is generally present in the dairy is not eligible for VAT refund. However, the Revenue document states that “where they are installed as part of a new build or reconstruction of a farm building (e.g., dairy), the VAT incurred is refundable.”
Therefore, anyone planning to build a new dairy or undertake significant work to an existing dairy to accommodate a bulk tank should be able to get the VAT back on the bulk tank. However, for a farmer looking to upgrade a bulk tank and is simply swopping in one bulk tank for another is unlikely to qualify for a refund.
An alternative option for these farmers could be to buy a milk silo, which is VAT refundable. However, milk silos are generally much larger than the standard bulk tank and so is really only an option for larger dairy farmers.
Milking parlour
The same rules apply for milking parlours as bulk tanks. That is, if “the installation of equipment requires the construction, extension, or alteration of a farm building or structure” then the VAT can be refunded.
While the Revenue document does not supply specific examples of where a claim for a milking parlour is eligible and not eligible, we can infer some things from it.
Firstly, it’s safe to say that anyone building a new milking parlour will qualify for the VAT back on the building itself and all the plant and equipment associated with the milking parlour.
However, if a farmer built a milking parlour big enough for 20 units but initially installed 16 and is now thinking of adding on four extra units without any construction element, then it is unlikely that Revenue will repay the VAT on the four extra units.
If on the other hand, the farmer with 16 units has the desire to go to 20 and the extra four units require an extension of the existing milking pit, cow stands, walls, roof and associated ground works then it is presumed that the investment meets the requirements and is therefore eligible for a VAT refund.
It’s important to note that Revenue officials will often seek photographic evidence of investments before making repayments so if undertaking a project, farmers should document each stage of the works using geotagged photographs.
Other items that are unlikely to qualify for VAT repayment include meal feeders, automatic wash units and cluster flush, if these are purchased at a later date and not part of the original build.
The reason for this is that neither require significant building construction work for installation and so are unlikely to qualify for a refund based on the Revenue guidelines which state as follows;
“Farming equipment or machinery must be permanently installed in a newly constructed/altered or extended farm building and once installed, cannot be removed without causing significant alteration, substantial damage, or destruction to the farm building or to the equipment or machinery itself.
“The impact of the alteration, damage, or destruction caused includes the part of the building the equipment or machinery is installed on and other parts of the building that could be impacted by its removal.
Installing a new auto wash unit in an existing dairy is unlikely to qualify.
“Minor changes such as items nailed, screwed, or bolted to the building walls or floor would not be considered an alteration for the purposes of the order.
“Revenue will consider the effort, time, cost, and impact on the equipment itself to determine if there is significant alteration, substantial damage or destruction of the farm building or structure or to the equipment itself.”
Drafting gate
Drafting gates and cattle crushes/handling units that are fixed in concrete will qualify for a VAT refund.
However, the electronic tags used to control drafting gates or any automated heat detection aids will not qualify for a VAT refund, according to Revenue.
Drafting gates and cattle crushes are eligible for VAT reclaim.
Future plans
According to the Revenue spokesperson who spoke to the Irish Farmers Journal this week, there are no plans to go back to the old system of VAT reclaim on all fixed items.
“There are no plans at present to publish any further updates to this guidance, but all Tax and Duty Manuals are subject to periodic review,” the spokesperson explained.
“From time to time, or as part of this periodic review process, published guidance may be updated to provide further clarity on specific topics as the need arises.”
In short
Revenue has published a guidance document on VAT reclaims for non-VAT registered farmers. The move follows on changes made by Revenue to the interpretation of what items are eligible for VAT reclaim. If milking equipment is purchased as part of a construction or alteration of a building it should be eligible for a VAT reclaim. 
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