Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 222 to 224, inclusive, together.

I am advised by Revenue that the VAT treatment of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In accordance with the EU VAT Directive, farmers can elect whether or not to register for VAT in respect of their farming business, and this affects how VAT incurred on their inputs is treated.

Farmers who elect to register for VAT are obliged to account for VAT on their supplies and are entitled to claim a deduction for VAT incurred on inputs used for the purposes of their taxable supplies. Therefore, VAT-registered farmers would be entitled to reclaim the VAT incurred on their farming business costs (such as feed bins, milk bulk tanks, automatic calf feeders, and milking parlour equipment, etc.), and this should be done through their normal VAT returns.

Alternatively, farmers can remain unregistered for VAT purposes, and opt for the Flat Rate Farmer’s Scheme. This scheme is a long-standing arrangement under EU and national VAT law that allows farmers who remain unregistered for VAT purposes to be compensated on an overall basis for the VAT incurred on their purchases of goods and services. It allows such farmers to charge and retain a “flat-rate addition” onto the amount that they charge for the agricultural goods and services they supply in the course of their farming business. The flat-rate addition is calculated as a percentage of the amount payable to the farmer and is based on the commercial agreements between the farmer and customer. The scheme is designed to reduce the administrative burden on farmers and allows them to remain outside the normal VAT system, thereby avoiding the obligations of registration and returns. As part of Finance Bill 2023, the flat-rate addition for farmers will reduced from 5.0% to 4.8%, with effect from 1 January 2024. The rate is reviewed every year in line with the EU Directive and the new 4.8% will continue to achieve full compensation for farmers under the flat rate scheme. There have been no further changes to the flat rate scheme.

Unregistered farmers may also be able to avail of a VAT refund on certain expenses allowed for under the Value-Added Tax (Refund of Tax) (Flat-rate Farmers) Order 2012 (S.I. No. 201/2012) (“VAT refund order”). The VAT refund order is a historic derogation allowed under EU VAT law and Ireland is prohibited from extending the order to allow refunds for VAT incurred on the acquisition of fixtures. There is no provision in the EU VAT Directive to introduce a Statutory Instrument to allow for VAT refunds on the acquisition of fixtures used for farming structures.

The VAT refund order allows for refunds to be claimed on outlay incurred on:

(i) the construction, extension, alteration or reconstruction of a farm buildings or structures;

(ii) the fencing, draining and reclamation of farmland; and

(iii) the construction and/or installation of qualifying equipment for the purpose of micro-generation of electricity for use in a farm business.

Outlay incurred for other purposes, such as the acquisition of feed bins, milk bulk tanks, automatic calf feeders, milking parlour equipment is not permitted under the Order.

I am advised by Revenue that where the installation of certain equipment (such as the items listed above) requires the alteration or reconstruction of a farm building or structure, the corresponding outlay has been allowed in certain circumstances. Each claim is assessed on its own merits. Claims that do not meet the conditions of the refund order cannot qualify for a refund of the VAT.

I am advised by Revenue that the scheme operates on a self-assessment basis, with claims submitted via Revenue’s Online Service (ROS) E-Repayments or MyAccount. Where a claim is subject to review, Revenue may return the claim to the claimant for further information. Claims can be fully approved, fully rejected, or partially approved where individual invoices within a claim may be refused.The following table gives the number of claims approved and rejected by month in 2023.

Month	No. of claims approved	No. of claims rejected
Jan-23	3,801	168
Feb-23	2,637	88
Mar-23	3,017	156
Apr-23	2,474	99
May-23	2,224	69
Jun-23	2,699	102
Jul-23	2,296	52
Aug-23	2,784	107
Sep-23	2,642	96
Oct-23	3,707	186
Nov-23	4,311	235
December 2023* (to 11/12/23)	1,115	39
Total	33,707	1,397

A claim may be fully rejected for numerous reasons including, but not limited to, the following: submitted under an incorrect PPSN, outside of 4-year VAT claim period, invoices submitted relate to items which do not qualify under the order, claimant has another trade and is above the threshold for VAT registration and incorrect supplier tax number provided. In certain circumstances, the customer may resubmit a corrected claim, which will form part of the approved claim statistics above.

In addition, a portion of a claim may be rejected at invoice level within the claim. Invoices may be rejected for numerous reasons including, but not limited to, the following: invoice details are lacking mandatory information, some items on the invoice are not payable under the order or invoices are being claimed in the incorrect period. In certain circumstances where an invoice has been rejected, the claim may be resubmitted with corrected claim details and subsequently form part of the approved claim statistics above. Alternatively, the claimant may resubmit the invoice with an adjusted VAT amount removing non-allowable items. Refusals of non-allowable items within a claim or invoice happen at line level and are not identifiable within Revenue’s systems and therefore statistics relating to specific items cannot be provided.

Revenue is obliged to administer this scheme in line with the relevant Order, providing flexibility where possible within the confines of the legislation. Any claimant aggrieved by a decision in relation to their claim may appeal directly to the Tax Appeals Commission (TAC) within 30 days of issue of that decision.