It seems to most farmers that the change to the Revenue interpretation of how VAT can be reclaimed by non-VAT-registered farmers happened overnight and with no warning.

To recap, Minister for Finance Michael McGrath said in the Dáil in early December that the “acquisition of feed bins, milk bulk tanks, automatic calf feeders, milking parlour equipment and automatic scrapers do not come within the scope of the refund order”, the order being on VAT reclaims.

Up to now, farmers could reclaim VAT on items of fixed equipment which were integrated into farm buildings used for agricultural purposes. For example, the VAT could be reclaimed on milk bulk tanks and milking equipment, whether the building housing them was recently constructed or existing.

There is still some confusion as to whether equipment put into a new build will be eligible for VAT reclaim. That remains to be seen.

The communication around this change has been poor. The Irish Farmers Journal first broke the story that farmers were experiencing difficulty reclaiming VAT for certain items.

When queried, Revenue confirmed that VAT will no longer be able to be reclaimed on certain items, but it has not as yet come out with a definitive list of what items VAT can and cannot be claimed on. Whatever the reason, this adds significantly to the cost of investment, increasing the net cost of an item by 23%. The fact that there was no warning about this change is going to put serious pressure on farm finances where big investment is taking place.

Take a milking parlour costing €100,000 excluding VAT. What usually happens is that a farmer will secure a bridging loan for the grant and VAT, which will be paid back after the VAT and grant are claimed. Any farmer in this process is now having to go back to the bank and seek longer-term finance for the VAT element, plus the grant now covers a lot less of the total investment.