Economics of buying a new Tractor

No way to get the vat back without registering.

No differ in straight prices as dealers actually want good trade ins.

You are correct on depreciation but as far as I know it is only available over the 8 years. Finance packages on new can be gotten out to 7 years to match this.

Forget list prices. The journal magazine could be up to 15% out in my experience depending on brand. You will need to speak to the dealers.

Bass will be along shortly….

Why is there such a reluctance to register for VAT for farmers. I have a friend/distant relation (calf to beef enterprise) who has been VAT registered for years and can't understand why it's not common place. He has VAT back on tractor, jeep, diesel (tractor and road), servicing, machinery, laptop, phone, esb and almost anything else that can be loosely related to the farm. You are only paying VAT at 4.8 on cattle sales then but are claiming all the above at 13.5 or 23%.

He is encouraging me to register since I am looking at buying a jeep and on the face of it I'd be saving 10k or so alone on the jeep leaving leaving out the savings on all the other things - yes there is items you can claim vat on when unregistered but its quite limited. Maybe I am missing something which is why I am asking (I haven't broached the subject with our own accountant yet).

The principle behind VAT is that you can claim VAT back on your legitimate expense alright but you must charge VAT to any customers on your products or services you sell. VAT is generally zero for most foodstuffs but the divil is in the detail and you need to be careful to charge it where required e.g. for farming services of some sort.

I don't mean to be smart, but if it made sense to be registered for VAT, all farmers would be registered.

Only 8% are registered nationally and in our office, it would be roughly that amount too.

Those who are registered are generally registered by default. As in, years ago, they had 2 trades, say as a self employed person. For example, a plumber. Then, when the plumbing business took off they registered for VAT, as they were obliged to. Then when the plumbing business really took off, they formed a company for the plumbing business. But they kept the VAT registration for the farm.

Are we not. Thanks for letting me know.

Buying any middling tractor and claiming VAT back would be worth multiples of a €1000 yearly accountancy fee.

Often wonder why so many accountants advise against it, is it got to do with being unable to charge correctly for it

Very good info....I know of 2 different farmers who ended up paying tax on the trade in value of tractors as they were unaware of being able to roll it over again the new one

Also if your tractor makes more than you paid for it, you pay CGT on the difference.

You are looking at it the wrong way. You now have 13.5k less to write off on the new tractor.

This is (one possible reason in my opinion) you see some people looking for “cash only” when selling a tractor privately as it would otherwise be unusual for a farmer/business. But if they sell for cash and keep it off the books they can write off the new tractor fully (and not pay vat if vat registered). Very dodgy ground but definitely happens I feel.

Thing is buying for cash suits very few so not sure how they actually sell as their market is tiny.

Yes you can add lots more but I had put up a sample and it only came to 1.8k ish. It's relatively hard to to hit 4k.

Ya if you are a machinery junkie it makes sense. I have two tractors here and neither had the option of vat on them when buying.

I bought a cattle box last year and vat was not in the equation either. Admittedly you buy what you go looking for. I have a RAV 4 it was 9 years old when I bought it and it had no vat either. You would have to be going fairly new all the time to get a vat receipt

Yup. Happening a good bit recently with the uplift in machinery prices. If held for over 3 years, its only 10% tax on the capital gain though. Then there is the annual exemption of €1,270.

I think your overthinking it.

In this case, lets call the person buying the tractor from a/b, farmer c. Farmer c pays the same regardless.

However, farmer a keeps all the proceeds.

Farmer B would need to pay the VAT element over to the Government. Now, farmer B really should know this, and give an invoice to farmer C, with full details on it. A copy of this should then be used for the VAT return. If for some reason, it was ignored for VAT purposes by farmer B, at the time of the sale, it would be discovered when the accounts are being prepared and the VAT element would eventually be paid.

Now of course, if farmer B is determined to avoid paying tax on the sale of this tractor, he would either look for a cash sale or lodge the check to the wife's account. Both of which are fraud and will eventually come back to haunt them. Those 3 monthly reports from Revenue usually include people such as this.

No VAT means there is no VAT to be paid and the the price advertised is what has to be paid. Even if VAT registered you still have to pay the full advertised price.

My understanding is that once something is bought by a non-vat registered farmer/person then the VAT element is never seperable again and it will always be sold on with no VAT to be paid or reclaimed.

Very hard to dodge the vat on resakebof registered equipment such as tractors or similar equipment that can be registered for motor tax.

It more likely to happen on a livestock box or implements. However you could be completely out of luck and the person that bough it off you might have an audit.

Personally if I am buying something off DD I always keep a copy of the add if I have to pay cash

I often wondered if you could get away with setting up a separate company registered for VAT, and then "hire" that company to do your work.

You'd be billed + 13.5% VAT on the work, but for bigger lads with a lot of machinery, it might make sense. It would also insulate that end of things from your overall farm (although that in itself might leave it harder to get loans).

I am pretty sure you can be VAT registered in a trade say and keep the farm out. Certainly scope for getting some items applicable to both though the trade (jeep, builders trailer etc) but stuff like tractors would be a major red flag. Then if you have a trade that has to be VAT registered probably best to just have everything VAT registered and put everyting against VAT as I'd imagine you would be high on the audit list in the scenario above.

Every single bit of it.

Livestock for human consumption are Zero rated up here for VAT and our VAT rate is 20%. Everything and I mean everything here is claimed back for VAT, Vets, drugs, diesel, fertiliser, Mart fees, quarry stones, machinery hire, phone and anything in between. It's an extremely simple procedure since they went digital a couple of years ago, an hour every quarter and all you have to do is submit an excel sheet to HMRC and it's repaid to your back account in a matter of days. Would be some hit not to be able to claim it back.

Technically it would not be worth a lot to you, most lads doing that are involved in a bit of contracting as well. You have to put enough back into the company to pay off any loan or the cash value of the machinery anyway and pay extra accountancy fees.

80K tractor vat = 15k ( tractor 65040 net)

To pay the 65k back into the company @13.5% vat =73 820

However if you borrowed 50K@7% over 5 years it's 8750 vat on that going into company adds another 1150 euro to the bill.

Net savings would be about 5k less accountancy fees

As well you would lose the ability to freeze the depreciation if it suited as against that you could write the tractor costs off faster against the farm if it suited

Straight from the horses mouth there antrim. Hmrc could teach the irish revenue a thing or two.

Also how you find having a government once again antrim?

@KAMG what way does it work for a farmer who would become vat registered and may be trading a vehicle or a piece of machinery for a newer model.

On a side note, I really enjoy and value your contributions here

Yeah. This is an interesting read. Most would be registered here. It's not an onerous task to keep the records and with most purchases having 20% vat then it makes sense.

No vat on livestock sales, only the commission. None on fodder inc meal.

So most purchases for maintenance and machinery have vat applied. It means that usually there is a refund for the vat period. A big purchase like a tractor would crazy if not put through for vat.