Budget concerns for non-Vat registered farmers
The flat-rate farmers Vat scheme is designed to compensate for non-Vat registered farmers for the Vat they receive on selling farm produce and buying farm inputs.
Concerns have been raised regarding the proposal to reduce the flat-rate farmers' Vat top-up from 5.1% to 4.5%.
The reduction takes effect from January 1, 2026, and is currently included in the upcoming Finance Bill submitted by the Department of Finance.
The flat-rate farmers Vat scheme is designed to compensate for non-Vat registered farmers for the Vat they receive on selling farm produce and buying farm inputs. This allows farmers to remain outside of the standard Vat system, with the majority of farmers not registered for Vat.
The proposed reduction will mean non-Vat registered farmers will no longer be fully compensated for Vat in all circumstances. The Irish Co-operative Organisation Society (ICOS) has been seeking clarification from the Department of Finance regarding the reduction.
Where livestock sales are subject to the statutory 4.8% Vat rate, the lower 4.5% flat-rate addition will create a shortfall that did not previously exist, resulting in unequal treatment for farmers as they sell their animals.
ICOS said this shortfall was a penalty as it created an additional 0.03% charge for non-Vat registered farmers selling animals.
ICOS has acknowledged the flat-rate addition is calculated in line with EU Vat law. However, the co-op representative body is concerned the interaction between the revised rate and existing Vat rules has produced an unintended and unbalanced outcome for non-Vat registered farmers.
“This change creates an anomaly where full Vat compensation is no longer achieved in all cases. On a typical sale of an animal for say, €1,000, the farmer will lose €2.86 per head, irrespective of the sales channel, factory, farm to farm or livestock mart.
"It may not sound like much for a single sale, but it will all add up to several million euros of loss for the sector when you take into account the overall sales volumes of livestock in Ireland. That was never the intention of the scheme, and it needs to be addressed before the new rate comes into force.”
ICOS said it has sought an audience with the Department of Finance and is calling on the minister to remove the anomaly by ensuring the livestock Vat and flat-rate Vat addition align.
