Revenue VAT rules need close scrutiny
Of The Statutory For Vat Of Farmers Which The Refund Govern Regulations Unregistered Instruments 2012 Are 201
The Revenue Commissioners have issued new guidelines on what items are acceptable for the purposes of obtaining a VAT refund which applies to unregistered farmers.
The VAT 58 process is designed to level the playing field for unregistered farmers to allow them to claim back VAT on certain fixed equipment without the need to become VAT-registered. In some ways, this keeps the system that applies to farmers fairly straightforward in that unregistered farmers do not have the hassle of filing VAT returns every two months, and meanwhile, the Revenue Commissioners need not concern themselves with processing VAT returns for the 100,000 or so farmers who would otherwise be VAT registered if the system didn’t exist.
Ireland has its own special rules for farmers, which were facilitated when we joined the then EEC, and it is Revenue’s duty to ensure that Ireland fits within the European VAT rules and the terms by which our farmers can operate without registering for VAT.
If any Irish farmers have dealt with their counterparts in Northern Ireland, the UK or mainland Europe, they would know that it is almost unheard of in those jurisdictions to be an “unregistered” farmer for VAT purposes.
The regulations which govern the refund of VAT for unregistered farmers are Statutory Instruments 201 of 2012, and there have been no changes to the regulations since then, but there has been trouble brewing for about the past year or so as farmers perceive that VAT, which was previously refundable was no longer being refunded by Revenue.
The issue came to a head last spring when it was raised in the Oireachtas. The Revenue, in an effort to clarify their position, met with the Irish Creamery Milk Suppliers Association (ICMSA) and the Irish Farmers Association (IFA) and the Revenue Commissioners have now updated their guidance notes.
The aforementioned 2012 regulations did not specifically mention fixed equipment, but farmers and their accountants understood that VAT incurred on fixed equipment was generally refundable. Historically this would have included automatic calf feeders, milk tanks, milking machines, automatic scrapers, wash troughs, water pumps, wash-down pumps, fixed generators, feed bins and the like but the guidance notes now clarify that many of these items are not now refundable per Revenue more especially if installed subsequent to the building installation.
Revenue has now specifically said that some of the items that are not allowable include astroturf, Broadband routers and receivers, Clothing, Computers, hardware and software systems, First aid cabinets, Grass mats, Safety equipment, Silage bags/wraps, Security monitoring systems, Windbreakers, portable/moveable containers, and buckets that hold animal feed.
The guidance notes give some clarity on other specific items, such as Interlocking mats (modular cow mats), which can be removed without damaging the mat and do not qualify. However, if the interlocking mats are bolted to the floor, then the VAT may be refunded.
Previously, farmers and accountants understood that fixed equipment, such as automatic calf feeders, would qualify for VAT refunds. Revenue’s view is that some items are considered fittings, and even though they are fixed to the building via bolts or the like, they do not necessarily form part of the building.
Farm equipment and machinery perform a specific function or purpose but their location in a building does not necessarily imply that they are a fixture even if they are bolted to the ground / on or in a farm building or structure. Goods that are merely attached (e.g., bolted to the ground or wall) to a farm building are considered fittings and do not qualify under the order.
Examples of farm equipment and machinery which are considered fittings and are classed as ineligible for unregistered farmer VAT refunds according to Revenue include additional units/clusters in a milking parlour, automatic calf feeders, calving cameras, cow brushes and Heat and health monitoring systems.
Whilst it is difficult to comprehend how VAT was previously refunded to farmers on such items and is now not refundable due to Revenue’s more concise review, at least they have given some clarity as to what will definitely qualify for a VAT refund including silo feed bins, silo milk tanks, slurry pits/slurry tanks and trough/water trough systems.
Before undertaking any farm investment, it is well worth checking the Revenue’s Tax and Duty Manual, particularly the section dealing with “Flat-Rate Farmers Refund Order,” to see if your farm additions can qualify for a VAT refund.
Each individual should obtain tax advice relevant to their own specific circumstances.
