Broiler Farmers Face VAT Shake-Up as Flat-Rate Scheme Ends

Major change coming September 2025

From 1 September 2025, broiler producers can no longer use the farmer's flat-rate VAT addition scheme. Minister for Finance Paschal Donohoe announced this decision after Revenue deemed that broiler farmers were being "overcompensated" by the 5.1% flat-rate addition, receiving more money back than they actually paid in VAT on inputs, which violates EU VAT rules.

This affects around 600 farms, including many with mixed operations, forcing them to choose between staying unregistered (absorbing VAT costs) or registering for VAT and filing regular returns.

Marty Murphy, Head of Tax

How the flat-rate scheme worked

Ireland's flat-rate scheme allowed unregistered farmers to add 5.1% to their selling price when invoicing VAT-registered buyers. For example, on a €2.00 chicken sale, farmers could add €0.10 (5.1%), receiving €2.10 total. The buyer treated this as VAT and reclaimed it from Revenue, while the farmer kept the addition to offset VAT paid on inputs like electricity and equipment.

Over 85% of Irish farmers use this scheme because it eliminates VAT paperwork hassles and generally covers routine VAT expenses. However, Revenue's 2018 investigation (updated recently) deemed that broiler farmers were receiving significantly more through the flat-rate than their actual input VAT costs.

Why broilers are being removed

EU law permits flat-rate schemes only when they roughly compensate input VAT, no more. Revenue found the 5.1% addition was too generous for broiler operations, creating "overcompensation" that threatened the scheme's integrity for all farmers.

The Irish Farmers' Association called this unprecedented sector-specific removal concerning, warning it will add costs and red tape that could force some farmers to exit the sector or increase chicken prices.

What changes after September 1st

Broiler farmers lose the right to charge the 5.1% flat-rate addition but remain "flat-rate farmers" unless they voluntarily register for VAT. Unlike other businesses, farmers aren't obliged to register regardless of turnover – there's no €85,000 threshold requirement.

Farmers must now decide to stay unregistered and absorb VAT costs, or register voluntarily to reclaim input VAT.

If registering for VAT, farmers must:

Charge 13.5% VAT on broiler sales

Submit VAT returns (typically bi-monthly)

Keep proper VAT records

Apply VAT across all farming activities, not just poultry

Administrative considerations

VAT registration brings significant paperwork burdens. Farmers must issue proper VAT invoices, track input VAT meticulously, and file returns every two months. This represents a major administrative shift for farmers who've avoided VAT compliance. Revenue has promised guidance and support during the transition. Farmers should consider investing in accounting software or professional help, especially initially.

For mixed farms: VAT registration applies to the entire operation, you cannot selectively apply it to different enterprises unless businesses are genuinely separated for VAT purposes.

Decision-making process

Every broiler farmer should analyse their situation by:

Calculating historical flat-rate benefits versus actual input VAT paid
Projecting future VAT liability on planned purchases
Considering administrative capacity for VAT compliance
Evaluating planned investments – VAT registration allows full input credit recovery on major purchases

Preparing for change

If staying unregistered: Accept the loss of flat-rate addition and budget for absorbed VAT costs.

If registering for VAT:

Contact Revenue or tax advisors early (processing takes time)
Update billing systems for 13.5% VAT from September 1st
Inform processors/buyers of VAT status change
Establish proper record-keeping systems

Timeline and support

The change takes effect 1 September 2025, giving farmers two months to prepare. Revenue has committed to providing transition support, and farmers should engage with agricultural advisors or accountants for guidance.

Processors and integrators, being VAT-registered themselves, should handle the transition smoothly – they're accustomed to paying VAT to suppliers.

Looking forward

This policy change aims to maintain system fairness and EU compliance rather than penalise poultry farmers. While authorities haven't ruled out future solutions (such as a lower poultry-specific flat rate), farmers shouldn't delay planning for the current reality.

The key is proactive preparation: understand your numbers, seek professional advice, upgrade bookkeeping practices, and communicate with buyers early. With proper planning, this administrative challenge becomes a manageable part of business operations.

Bottom line: Don't wait until the last minute. Use the coming months to decide on VAT registration, establish systems if needed, and ensure continued viable, compliant operations. While unwelcome, this change is manageable with the right approach and preparation.

Talk to Marty Murphy

Head of Tax1800 33 44 22 martymurphy@ifac.ie Linkedin