Budget 2023: Flat-rate compensation for farmers cut to 5%

Ciara Dillon, Head of Food, Drink & Agri-Business discusses how the agricultural sector was affected by Budget 2023 with Agriland Ireland, noting scheme extensions, the VAT cut and the climate agenda.

As part of Budget 2023, unveiled today (Tuesday, September 27), flat-rate farmers will see their compensation percentage decrease from 5.5% to 5% from January 1.

The flat-rate addition compensates farmers who are not VAT registered for VAT incurred on their purchases.

"Whilst the decrease is disappointing, it is based on macro-economic data received from the CSO (Central Statistics Office) and Revenue for the period 2020-2022, in accordance with criteria set down in the EU VAT Directive,” Ciara told Agriland.

From a VAT perspective, she also commented that an opportunity was missed to reduce the VAT rate on non-oral animal medicine from 23% to 0% in line with the current treatment for oral animal medicine.

Whilst such a change would have had a limited impact on the exchequer, it has been acknowledged by the Department of Agriculture, Food and the Marine (DAFM) that it would increase use, optimise animal health, improve food safety, food security, farm profitability and help mitigate the impact of the agricultural sector on climate change.

She welcomed that eligible farming businesses would be included in the Temporary Business Energy Support Scheme (TBESS).

“It’s one of those once-off measures to help with the significant energy prices we are seeing at the moment. So, for qualifying farming businesses that should be a help to offset some of the input costs associated with energy and electricity.”

“Where the 2022 average unit price is 50% greater than the corresponding average unit price for 2021 there will be a support of 40% of the increase, up to a monthly cap of €10,000.”

“Qualifying farming business (farming enterprises who operate a trade under Case 1) will have to register and apply for the scheme which will be operated by Revenue,” she added.

Ciara said that it was welcome to see the extension of five agricultural tax reliefs in Budget 2023, which had been due to expire this year.

The Young Trained Farmer Stamp Duty Relief, and the Farm Consolidation Relief, will continue, along with Farm Restructuring Capital Gains Tax (CGT) Relief; Young Trained Farmer Stock Relief; and Registered Farm Partnership Stock Relief are all set to be retained.

Ciara said that the provision of a scheme for accelerated capital allowances for farmers for the construction of modern slurry storage facilities will assist the sector in implementing environmentally positive practices within the farming enterprise.

The accelerated allowances work so that 50% of expenditure is claimed over two years.

She said that the allocation of €81 million from the carbon tax revenue raised in 2023 to the new Agri-Climate Rural Environment Scheme (ACRES) “will help farmers with the green adjustment”.

“It is encouraging to see the likes of the agri-schemes being promoted and accelerated allowances for the slurry storage but perhaps they could have gone further in some other areas to help with energy efficiency or environmental incentives that don’t seem to be mentioned on budget day speeches.

“The most immediate crisis in front of us was energy and input prices so understandably this has been the focus of the government action,” she said.

“Both ministers in their budget day speeches acknowledged the role that agriculture and the farming community play in the national economy and also the challenges that may still come with Brexit for the agri-food sector."

She welcomed the allocation of €238m from Brexit Adjustment Reserve (BAR) Fund to assist with such possible future adverse effects.

To discover how our dedicated Food, Drink & Agri-Business team can help your business, click here.

To read BDO’s full Budget 2023 commentary, click here.

Content adapted from Agriland Ireland.

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