Vat tips for farming contractors

As “Contract rearing” is not a pure farming supply but the keeping of animals, when this activity exceeds €37,500, the contract rearer will need to charge VAT. The supply of “contracting rearing” services is treated as a VAT liable supply and is subject to VAT at 13.5%. The majority of farmers are not VAT registered but if the farmer supplies Vat liable services other than that of a pure farming supply and his income exceeds €37,500 from this activity he/she will have to register for VAT and charge VAT. This will be an additional direct cost to the farmer who is unable to reclaim the VAT charged. In addition to this, as feed is one of the largest cost incurred for a farmer and is not subject to VAT, the contract rearer will only be able to reclaim the VAT on a small portion of his/her costs.

There are two avenues which can be explored to find methods that a farmer providing such services could use to avoid having to register for Vat:

Tailor the supply
1. Tailor the supply to being that of the animal rather than of the “rearing” of the animal. The contract rearer could enter an agreement with the farmer where he takes ownership of the animals initially and the farmer then has the option of buying the animals in a year or two years time. This changes the supply to the supply of an animal (Vat exempt) rather than the supply of the service of rearing the animal (Not Vat exempt). In this way the contract rearer avoids the need to register for VAT. Another method of changing the supply would be for the contract rearer to grant short grazing rights to the farmer. This activity is also not subject to Vat.

Keep income within Vat exempt threshold
2. Keep your income within the Vat exempt limits- This can be done by arranging for the farmer to supply feed/medicine directly to the contract rearer therefore reducing the contract rearer`s overheads and allowing him to charge less fees to stay below the threshold.