VAT:

Retrospective interpretation of VAT rules by Revenue is a real hammer blow to farmers who have made or are in the process of making investments on their farm. As Martin Merrick reports on page 47, there is huge uncertainty around claiming VAT back on items such as computerised calf feeders, drafting gates and milking equipment. These are all items on which the VAT could have been reclaimed by non-VAT registered farmers in the past. It has big implications on the cost of capital and future cashflows. For example, take a self-employed farmer with a taxable income of €60,000. In the normal course of events they would pay 20% tax on €40,000 of income and 40% tax on the remaining €20,000, so a total tax bill of €16,000. They have decided to buy a computerised calf feeder for €18,000 plus VAT at 23%, so total cost including VAT is €22,140. If they could reclaim the VAT the net cost would be €18,000, which is written down under capital allowances by 12.5%/year, or €2,250/year. This reduces the taxable income to €57,750 and so the total tax bill is €15,100/year or €900/year less than before the investment. Over eight years they save €7,200 in tax, so the net cost of the investment is €10,800. If they cannot claim the VAT back, the total cost of €22,140 will be written down over eight years, which is €2,768 per year. This reduces the taxable income to €57,232 and so the total tax bill is €14,893, or €1,107 less than before the investment. Over eight years they save €8,856 in tax, so the net cost of the investment is €13,284. The impact is far greater for those in the low rate of tax and those operating in a limited company, as they can’t make as much savings in tax.

Cubicles:

At the Teagasc dairy conference the importance of cubicle hygiene was reinforced at a workshop on SCC. According to the experts present, when cubicles are cleaned and disinfected twice per day during the housed period, the incidence of mastitis and high SCC is greatly reduced where selective dry cow therapy is practiced. We have to recognise that for some farmers, cleaning and disinfecting once per day during the housed period needs to be the first step. It highlights the risks associated with selective dry cow therapy, where cubicle hygiene isn’t all that it could be. Another area highlighted as being important is cow cleanliness and the importance of clipping tails and flanks. Keeping passageways and cross-overs regularly scraped is also important.

Dairy farmer magazine:

Anyone looking for a stocking filler for the dairy farmer in your life, need look no further than the Irish Dairy Farmer magazine. Published by the Irish Farmers Journal and written by the dairy team with help from contributors, the magazine is action-packed with farmer features. These articles go into great detail on the background, history, performance and future plans of dairy farms across Ireland and overseas – providing great insight into how these top farms have grasped opportunities, dealt with challenges and maintained a good work/life balance. This years’ theme is cost control. Subscribe for €9.99 on www.ifj.ie/dairyfarmer, or phone 01-4199505 or 01-4199525.