VAT explainer: what remains eligible for a VAT reclaim

The confusion about VAT reclaims for farmers has been rumbling on for months now, with the first few instances of a change in the reclaims policy appearing last November.

What effectively happened then was flat-rate farmers (those not VAT-registered) who submitted claims for items that had previously been VAT reclaimable were refused their reclaim.

The items that caused issues at the time were automatic calf feeders, robotic scrapers, milk bulk tanks, feed silos and drafting gates.

It later emerged that farmers were also having issues in reclaiming VAT for rubber matting in animal housing.

The issue was that Revenue denied there being any change in how VAT reclaims were being assessed, but farmers were fearful about what other items would prove difficult or impossible to reclaim VAT on.

The Irish Farmers Journal contacted Revenue six months ago to request a list of the items no longer eligible for a reclaim by flat-rate farmers – a list was finally published by Revenue on 4 June.

‘The Tax and Duty Manual, Flat Rate Farmers Refund Order’ sets out how VAT can be reclaimed and the conditions for the following items.

Drafting gates in or adjacent to milk parlours

Drafting gates form part of the building (e.g. milk parlour) and are used to help manage the flow of cows in milk parlours. Drafting gates are refundable under the order.

The adjoining pen is also refundable under the order. However, where the drafting gates are operated remotely by computer systems, outlay on the identification tags and the computer system (hardware and software) are not refunded under the order.

Animal mats (fixed)

Mats used to soften the lying surface of the animals are eligible, provided they are ‘fixed’ and cannot be easily removed. Mats can be fixed using adhesive, interlocking systems, or anchor bolts. Only mats which are fixed using adhesive, concrete, nails or anchor bolts are deemed a fixture, and these can be VAT refunded under the order. Examples include cubicle mats and slatted mats.

Slat mats claw-pinned within the slat are also allowable. Interlocking mats (modular cow mats) can be removed without destruction of the mat and do not qualify under the order. However, if the interlocking mats are bolted to the floor, then the VAT may be refunded.

The Irish Farmers Journal was contacted a number of months ago by a farmer having difficulty in reclaiming VAT on rubber matting. After appealing the refusal with Revenue, the farmer then provided a diagram to illustrate the fixing mechanism – basically spines belted through with a sledge with the V-shaped bungs gripping underneath. The farmer was successful in his appeal, so diagrams or photographic evidence may be required for farmers submitting similar claims.

Silo feed/meal bins

Silo feed/meal bins are defined by Revenue as being made of steel, cylindrical in shape, placed on elevated platforms/legs, fixed to a concrete base and varying in size depending on the amount of feed they are intended to store (eg 3, 6, 10, 12, 45, 50 tonnes). Feed/meal bins that qualify under the order are those which are silos (e.g. elevated on a platform/legs which are permanently installed on a thick concrete base and bolted to the base.

Claimants may need to provide the description and dimensions of the silo feed/meal bin along with photographic evidence of the structure. The 10 tonne minimum size for reclaims now seems to have been wiped from the board, with smaller fixed silos apparently now eligible.

The term “feed or meal bins” is also used to describe portable/moveable containers and buckets which hold feed for animals (commonly known as tote bins). Such feed or meal bins are not refundable under the order.

Outdoor water trough systems/wells

Outdoor water trough systems are refundable under the order. Troughs must be made of concrete to qualify. Troughs made from plastic are ineligible.

Pipes, valves, and connectors associated with construction an outdoor water trough system are also eligible for a reclaim. Wells are eligible under the flat-rate scheme. Where wells service both the farm business and farm dwelling (residence), apportionment will be applied on a 50-50 basis where usage cannot be accurately determined.

Milk tanks/milk silos

A milk tank (non-silo) is considered a piece of equipment rather than a structure by Revenue. Where they are installed as part of a new build or reconstruction of a farm building (eg dairy), the VAT incurred is refundable. Replacement of a milk tank does not allow for a VAT refund on the tank itself, but the construction costs are VAT reclaimable.

Milk silos are refundable under the order. Costs related to installing or connecting the silo to the milk parlour (such as a recessed alcove cut into the side wall of the building) are also refundable. There is no mention of a difference between replacing or purchasing a silo for the first time.

Milk machines and parlours

Robotic milking machines, inline milk parlours, herringbone milk parlours and rotary milking parlours are VAT refundable under the order. However, the addition of clusters/milking points to an existing parlour is not covered under the scheme.

Automatic scrapers/hydraulic scrapers

Automatic scraper system and wire rope scrapers are refundable under the order. The scraper should move along pre-defined tracks or grooves on the floor, pushing the manure towards a collection pit.

Robotic scrapers, however, move independently throughout farm buildings/yards on wheels, and are not seen by Revenue to be integrated within the farm building. This means they are not eligible for a refund.

Automatic calf feeders

While all the other items listed above come with stipulations regarding eligibility, there are no ifs, buts or maybes with automatic calf feeders. Despite the systems being bolted down to the concrete (similar to hydraulic scrapers and feed silos) auto calf feeders are deemed ineligible.

There is no mention of any of the associated work with plumbing or wiring of feeders being eligible for a refund either.

Herd health monitoring systems/collars

Cow collars/tags health and heat detection were never eligible for a VAT reclaim, and are listed as ineligible under Revenue’s new list. The reclaim on base stations was much more of a grey area, with some early adopters lucky enough to have their VAT reclaim accepted under the flat-rate scheme. However, these too are now definitively not eligible for a reclaim.

There are few surprises in the Revenue list, once you recognise that they seem to have let everything rural TDs, farmers and farming lobbying groups had to say on the issue of VAT refunds in one ear and out the other.

They do seem to be able to talk out of both sides of their mouths, though, having stated that there was never any change in the flat-rate scheme; the publication of this list clearly highlights that there was.

The omission of automatic calf feeders and automatic slurry scrapers is a real kick in the teeth to dairy farmers, who seem to be suffering death by a thousand cuts in recent years. I have been lucky to have visited several excellent calf sheds this spring, with each farmer having invested heavily in automatic calf feeders, all acknowledging that calves will likely have to remain on farms for longer periods than in the past.

Labour

Farmers are struggling to source reliable labour, partly due to the seasonality of work, and have turned to automation as a result.

Reclaim

With reference costs on automatic calf feeder dismally low (about €5,000 below actual costs) and now a reclaim on VAT no longer attainable, how can we expect farmers to invest?