Farmers & the Flat Rate Top -UP

By Linda Scott FCPA CTA FCCA QFA
Wednesday, 5th July 2017

Farmers & the Flat Rate Top -UP

A farmer is defined as a person who supplies agricultural produce or services using his own time and equipment and the income from services is not likely to exceed €37,500 in a calendar year. This excludes insemination services, stock minding and rearing.

A flat rate farmer is a farmer who is not a taxable person, ie not VAT registered. The current flat rate top up available to farmers is 5.4%, and is paid on all agricultural produce, ie milk, cattle, sheep, mushrooms, eggs and poultry.

The purpose of the top up is to compensate farmers for the VAT incurred on expenses, in respect of which they are not entitled to a VAT deduction or refund. This would include diesel, veterinary and professional fees.

Flat Rate Farmers are entitled to reclaim VAT on fixed capital expenditure via a VAT 58, this includes new buildings, farm improvement, fixed equipment, land drainage and fencing, it is important to recognise that VAT is not reclaimable on any items of a repair or expense nature.

A farmer may opt to register for VAT and in so doing the VAT received on farm produce becomes payable to the revenue with a deduction for the VAT incurred on relevant farm expenses. Careful consideration is needed before opting for VAT registration versus the Flat rate top up scheme.  Farmers who are also in the agricultural contracting business and where their contracting income exceeds €37,500 will be obliged to register for VAT for all activities. Notification should be sent to all customers and suppliers with whom you do business of your VAT status, this includes Marts, Co-ops and meat processing plants.

 A farmer who is already VAT registered and wishes to revert to the Flat Rate top up system can do so, however the VAT returns for the previous 3 years are reviewed and providing the VAT on sales outweighs the vat on purchases a repayment to revenue will not be necessary. VAT claimed on capital expenditure that would have been reclaimable on a VAT 58 is discounted in the calculation.

If you require any further information on the flat rate top up system please contact Linda@amatino.ie  or call 049 437 1211