Malcolm Noonan (Carlow-Kilkenny, Green Party) | Oireachtas source

As I outlined, in accordance with the EU VAT directive, farmers can elect whether to register for VAT in respect of their farming business. I take on board the Deputy made about larger farms being more inclined towards VAT registration, but for many small farmers, registering for VAT is an unnecessary complexity that is not possible to justify given the small-scale nature of their business. The farmer's flat-rate scheme, therefore, provided by the EU VAT directive is key to supporting such farmers. It is used by the majority of member states, including Ireland. The current rate for the flat rate addition is 5% and this is reviewed each year in the run-up to the budget in accordance with the criteria set down in the directive. It is based on macroeconomic data, including the cost of agricultural inputs and production, as well as the prevailing VAT structures averaged out over the three preceding years. The rate for 2023 is based on data obtained from years 2020 to 2022.

Farmers who do not choose to register for VAT have an entitlement to reclaim VAT on costs incurred in respect of agricultural business. As I mentioned, a VAT-registered farmer would, therefore, be entitled to reclaim VAT incurred on slurry storage bags through their VAT returns. Farmers who are not registered for VAT are compensated for VAT incurred on goods and services used in the course of their farming businesses, including the purchase of agricultural equipment, through the flat-rate addition they receive on payments for their supply of agricultural produce and services. Unregistered farmers can also reclaim VAT for the construction, extension, alteration or reconstruction of a building or structure designated for use solely or mainly for the purposes of farming businesses. However, this cannot be extended for other purposes such as slurry storage bags, given Revenue has advised they do not come within the scope of the refund order.

The Deputy could have this conversation with the Minister during the discussions for budget 2024, although I will certainly raise the matter with him on his behalf.

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