The vast majority of farmers in Ireland are unregistered, with only very large-scale beef and tillage farmers typically registered for Vat.
For 2019, farmers claimed €83m of Vat back, with 16,528 farmers benefiting from refunds. With 148,227 persons declaring some farm income for 2018, per Revenue’s annual statistical report, the number of farmers who are losing out on potential Vat refunds could be running into the tens of thousands.
The average Vat refund claim for 2019 amounted to €5,029, indicating that most of the claims relate to significant building work on farms. However, farmers are entitled to make a claim once the refund sought amounts to more than €125 for the year in question. This means that a farmer can spend as little as €668 on eligible expenditure at the higher rate of Vat of 23%, or €1,051 of expenditure at the lower rate of Vat, and be entitled to a refund of a minimum amount of €125. The type of expenditure that qualifies for a Vat rebate includes the construction and reconstruction of farm buildings, construction and surfacing of farm roadways, installation of farm water pumps and wells, fitting of crushes, drafting and handling systems, installation of fixed farm generators, milking machines, milk tanks, plate coolers, feed barriers, automatic scrapers, cubicles and mats, fixed calf feeders, penning, calving gates, fitting of effluent tanks, slurry channels, silage pits, and construction of dungsteads. Vat can also be claimed back on fencing expenses, drainage, or reclamation of any land, the installation of water troughs, gates, railings, security gates, and cameras. Electrical equipment, such as water heaters, solar panels, parlour augers, fixed wash-down pumps, lighting, and ice builders will also qualify. For unregistered farmers, Vat is not recoverable on moveable equipment, such as round feeders, drills, welders, tractors, implements, and mobile generators. Budget updates also brought about changes to the Vat recovery rules, which now entitle unregistered farmers to recover Vat on qualifying micro-generation equipment, including wind turbines and photo-voltaic generating panels. For Vat to be recoverable by an unregistered farmer, the expenditure must be on items for use in the farming business for at least a year. For this reason, an unregistered farmer is not entitled to recover Vat on repairs, maintenance, fuel, or other consumables. Equally, a wind turbine or water well used exclusively for a private residence does not qualify for a Vat refund. The total of any Vat claim must be for more than €125. Vat claims are now made exclusively online, with the old paper forms done away with. A farmer can either make a claim through their own online portal, either via ROS, Revenue’s Online System, or via their Revenue ‘myaccount’ profile. Alternatively, a farmer can engage their accountant or tax consultant to make a claim on their behalf. There is no need to wait until after the end of the current tax year, so any expenditure already incurred in 2021 also qualifies for a refund now. Claims for Vat refunds can be made to Revenue for expenditure incurred within the previous four years. For building work and equipment that qualified for a Department of Agriculture grant, it is possible to both make a claim for such a grant and separately to get a refund of the Vat, where the building or equipment meets the criteria. To complete the claim, you will need to submit online details of each invoice to include the Vat number of the supplier, the invoice number, the date of the invoice, the amount of the invoice, and the amount of recoverable Vat. Detail must also be supplied as to the type of work done or the type of equipment or farm building constructed. In the event that a taxpayer owes Revenue in respect of income tax, PAYE, capital gains tax or other taxes, or, indeed, where tax returns are outstanding, it’s highly likely that Revenue will withhold and offset any Vat to be recovered under the Vat 58 process. Refunds are usually paid directly to a taxpayer’s bank account. Where Vat is recovered under the Vat 58 procedure, the expenditure is usually capitalised in the farm accounts, meaning that the expenditure is allowed as a deduction against taxable profits over an eight-year period, rather than regarded as repairs or maintenance offset against one year’s profits. Each person should obtain tax advice relevant to their own purposes.