Lack of government support impacts investment

High investment costs, prohibition from Government supports and the uncertainty of the nitrates derogation are having a negative impact on dairy farm investments, with milking machine suppliers reporting the quietest year in over a decade.

Previously, most dairy farmers that were looking to expand existing milking facilities or construct a new parlour could get between 40% and 60% grant aid under TAMS I and TAMS II, and also reclaim VAT on all fixed items purchased.

In TAMS III, dairy farmers milking more than 120 cows are excluded from drawing down grant aid for milking facilities. Dairy farmers looking to install a robotic milking system can only get grant aid for one robot on the holding. If a robot was grant aided under TAMS II, another robot cannot be grant aided under TAMS III.

Even if a farmer meets the cow limit requirement under TAMS III, they must also demonstrate that they have 110% of the legal requirement for slurry storage on their holding. This slurry storage can be on owned land or leased land, but in the case of leased land, there must be seven years of the lease remaining from the date of application.

This is despite the fact farmers can claim TAMS III grant aid for any investment on leased land, once there are five years remaining in the lease.

The list of items which can be claimed under the TAMS III dairy equipment scheme is also significantly reduced compared to previous TAMS. However, the key items of milking equipment and bulk tanks remain, along with automated washing units for milking parlours, water heaters and milk-recording equipment. In addition, PTO-powered back-up generators are also included.

However, there is no TAMS grant available for building a milking parlour, whereas this was funded for young farmers under previous schemes.

The changes to the TAMS III rules mean that any farmer that’s milking more than 120 cows and making a large investment in milking facilities, will be down to the tune of at least €36,000 in the case of a single applicant and up to €108,000 in the case of a partnership, where both parties are eligible for 60% grant aid.

On top of this, Revenue is now taxing farmers for investing in milking facilities. Changes to VAT rules mean that if a farmer increases the number of milking units in their parlour, they will now pay 23% tax on top of the cost of the extra units. Prior to this change, dairy farmers who are on the flat rate VAT system could reclaim the VAT element of the investment.

However, if the expanded milking parlour is going into a whole new facility, Revenue then says that the VAT can be reclaimed and those farmers are exempt from paying the tax. Between being locked out of TAMS and the changes to VAT, there is easily an extra €60,000 to €70,000 of extra capital required for the project where one is expanding a milking parlour.