Dairy farmers face paying about €1 per cow more for milk recording because VAT is now being applied at the 13.5% rate instead of the 4.5% that was used for decades.

The lower rate was introduced in 1993 under a concession given then by Revenue, allowing the tax be charged at one-third of the normal rate applied on agricultural services. The reduced rate has been applied since then by the country’s milk recording organisations.

Munster Bovine raised a query with Revenue in relation to the concession and was told it had expired. The matter is now the subject of ongoing negotiations.

Revenue has notified milk recording service providers that it may seek the full VAT amount not paid since the higher rate became applicable and may apply penalties, depending on the outcome of a review it is carrying out into the matter.

Bills

If this were to be the outcome, then milk recording organisations could face bills totalling up to several million euros.

Munster Bovine wrote to customers last month outlining the situation. It and Progressive Genetics carry out the bulk of milk recording with Tipperary Co-op also providing the service.

The higher rate applies to milk recording services, herd fees and milk recording helper fees. Approximately half of all dairy cows are milk recorded.