VAT debacle another thorn in farmers' sides

The VAT debacle has been ongoing for a number of months now, causing frustration, stress and real anxiety among many farmers. Is it any wonder that farm construction has ground to a halt?

Farmers have uncertainty on nitrates, uncertainty on VAT reclaims, and a much higher cost of doing business which is not reflected in outdated TAMS reference costs.

In many ways, it was the retrospective or unannounced manner in which farmers learned of the changing VAT eligibility interpretation that caused a serious amount of frustration.

That December and January, frustration subsided as seasonal work took over for the last number of months.

The prolonged nature of the feedback from the Revenue Commissioners has seen six months elapse before they came out this week with a guidance document including a list of eligible items. Has this Revenue-enforced delay taken the wind out of the farmers’ sails?

The positive is that finally, this week we got some clarity from Revenue on the refund order for flat rate farmers. However, some eligibility confusion remains and also contradictions with other sectors.

We have had promise after promise from politicians that they would sort this issue – all to no avail.

The issue came on the public record in early December 2023 when Minister for Finance Michael McGrath said in the Dáil that the “acquisition of feed bins, milk bulk tanks, automatic calf feeders, milking parlour equipment and automatic scrapers do not come within the scope of the refund order”, the order being on VAT reclaims.

Up until then, farmers could reclaim VAT on items of fixed equipment which were integrated into farm buildings used for agricultural purposes.

The former Taoiseach Leo Varadkar vowed to resolve the VAT reclaim issue for farmers when he addressed the IFA AGM in January. “I’m sure it’s one that can be dealt with,” he said.

He added that after the IFA met with the Revenue Commissioners, he was determined to take on the issue. “I understand you [the IFA] have a meeting planned with the Revenue Commissioners in a couple of weeks.

“We are determined to take it from there and resolve this issue,” he said. Leo Varadkar of course has since stepped back from his position.

The farm organisations did take it on. IFA and ICMSA met specifically with the relevant parties. IFA held an on-farm demonstration day with officials.

Interpretation

The Revenue Commissioners have consistently said that they have not changed their interpretation of the current Statutory Instrument that governs the exemption.

Automatic calf feeders, additional units in the milking parlour, and upgrading bulk tanks into existing buildings are items that all farmers have previously reclaimed VAT on but now are deemed ineligible.

The fact is they are all now 23% more expensive, as the farmer can’t claim the VAT back.

Let the facts speak for themselves. TAMS reference costings are out by a huge amount as prices are not updated. The cost of finance has increased substantially.

For some sectors, items eligible for TAMS grant aid have reduced considerably, the cost of building materials has increased, and now VAT that was reclaimed on many items is not now possible. This is not to be negative, but we have to be real with farmers.

At the same time, we heard again this week the current Taoiseach Simon Harris suggest nonsense like there is to be no cull to the national herd.

The fact is the Taoiseach is prepared to let the suckler and dairy herds wither away as farmers can’t invest with uncertainty and reduced support.

The Government is only too happy to take the reduced livestock numbers to help meet greenhouse gas emissions regulations.

Meanwhile, all other sectors remain on track to exceed greenhouse gas reduction targets, yet growth in these sectors remains part of the picture.

Solutions

Some farmers are wondering why there aren’t boots on the streets this week, given the serious impact of these changes for some farms.

It is very hard to understand why some items are ineligible while clarity is still required on others, despite the publication of the guidance document this week.

Why are rubber mats bolted down eligible yet other equipment bolted down in a shed is not?

The engagement must continue. If there is no change in interpretation, then why are some of the items listed above not eligible?

Why is there no lead-in time to this change? Surely investment carried out in the knowledge of previous experience should be allowed on previous interpretations?

At the very least, a commitment that TAMS will retrospectively include VAT on items where VAT cannot now be reclaimed.

For the last five years, we have seen €80m returned to farmers in VAT repayments as on-farm investment soared.

It looks like we are heading back to the days when it was closer to €50m: this at a time when farmers need to make more investment to keep farming to a high standard, environmentally, socially, and attractive relative to other sectors.