PART 10 – SPECIAL SCHEMES

Overview

This Part, which contains 14 sections, sets out the provisions relating to a number of special schemes that are provided for in the VAT Act. This includes the special provisions for tax invoiced by flat-rate farmers (section 86). An enabling provision restricting this scheme in certain circumstances is provided for in section 86A.

It also includes 3 margin schemes i.e. the margin schemes for taxable dealers (section 87), travel agents (section 88) and auctioneers (section 89). Under the margin schemes, suppliers pay VAT on their profit margin in certain circumstances.

Finally, the scheme under which VAT at importation is not payable in respect of alcohol products that are placed under a duty suspension regime (such as an excise warehouse), and that are supplied under that regime, is also covered in Part 10 (section 92).

Chapter 1 – Special Schemes - Miscellaneous

86. Special provisions for tax invoiced by flat-rate farmers

This section provides that a flat-rate farmer must issue an invoice in respect of sales of produce or services showing separately the net consideration and the flat-rate addition – currently 5.6%. The result is that an accountable person in receipt of the invoice is entitled to a deduction under Chapter 1 of Part 8 in respect of the flat-rate addition. The rules for farmer invoices are outlined in section 68. While the flat-rate addition is shown separately on the invoice, it is part of the price and is deductible for VAT.

A flat rate farmer is defined in section 2(1). Flat rate farmers do not register for VAT. They are compensated for the VAT they are charged on their purchases by means of the flat-rate addition, which they add on to the price at which they sell their agricultural goods and services to VAT-registered persons (for example, marts, agricultural co-ops and meat factories).

Note that farmers may be obliged to register in respect of intra-Community acquisitions, services received from abroad and certain other supplies – see Part 2.

(1) Subsection (1) provides that a flat-rate farmer must issue an invoice in respect of sales of produce or services. This must show separately the net consideration and the flat-rate addition. This is currently 5.6%.

(1A) Subsection (1A) provides that the issue of an invoice by a flat-rate farmer can only apply in respect of agricultural produce or an agricultural service of a kind not specified in an order made under section 86A.

(2) Subsection (2) allows for the adjustment of contract prices and provides for the recovery of the flat-rate addition. This gives farmers the same rights as accountable persons under section 45 in relation to adjustment and recovery.

It should, however, be noted that a flat-rate farmer is not entitled to payment of the flat-rate addition in respect of the supply of agricultural produce or an agricultural service which is the subject of an order made under section 86A.

Relevant Date: Finance Act 2020