The Flat-Rate Farmers VAT Scheme is designed to compensate non-VAT registered farmers for the VAT they incur on selling farm produce and buying farm inputs, while allowing them to remain outside the standard VAT system. The majority of farmers are not registered for VAT. However, the proposed reduction means that non-VAT registered farmers will no longer be fully compensated for VAT in all circumstances, and ICOS says it has been seeking clarification from the Department of Finance on the matter.
Where livestock sales are subject to the statutory 4.8 per cent VAT rate, the lower 4.5 per cent flat-rate addition will create a shortfall that did not previously exist, resulting in unequal treatment for farmers as they sell their animals. Essentially, this is a penalty as it creates an additional 0.03 per cent charge for non VAT-registered farmers selling animals.
ICOS acknowledges that the flat-rate addition is calculated in line with EU VAT law. However, the co-op representative body says it is concerned that the interaction between the revised rate and existing VAT rules has produced an unintended and inequitable outcome for non-VAT registered farmers.
“The flat-rate scheme is meant to be simple, neutral and fair for farmers who are not VAT registered,” said Ray Doyle, livestock and environmental executive of ICOS. “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 euro of a 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 has sought engagement with the Department of Finance to highlight that non-VAT registered farmers will be disadvantaged by these technical VAT machinations in the Finance Bill 2026, essentially we are calling on the minister remove this anomaly by ensuring the livestock vat rate and Flat rate addition align.”