Beef Farming: Agricultural Flat Rate Scheme

Oral Answers to Questions — Agriculture, Environment and Rural Affairs – in the Northern Ireland Assembly at 2:45 pm on 17th November 2020.

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Photo of Jemma Dolan Jemma Dolan Sinn Féin 2:45 pm, 17th November 2020

1. Ms Dolan asked the Minister of Agriculture, Environment and Rural Affairs how he will mitigate any disruption to the beef sector as a result of changes to the agricultural flat rate scheme (AFRS). (AQO 1126/17-22)

Photo of Edwin Poots Edwin Poots DUP

This refers to valued added tax, which is a reserved matter and therefore the responsibility of HM Treasury and HMRC. The changes that will be made to the agricultural flat rate scheme from 1 January 2021 are that farm businesses can join the scheme if their turnover from farming-related activities is less than £150,000 and that they are required to leave the scheme if that turnover subsequently exceeds £230,000. That brings the scheme into line with the general flat rate scheme.

The agricultural flat rate scheme is intended to provide easement from the administrative burden of VAT registration by allowing farmers to receive a payment equal to 4% of their sales value in lieu of VAT paid on inputs. The vast majority of small beef and sheep farmers will continue to be eligible for the scheme. Where farms exceed the turnover limit, they can still be VAT registered and reclaim input VAT. The flat rate scheme is intended to be fiscally neutral and not to be more generous than being VAT registered.

Photo of Jemma Dolan Jemma Dolan Sinn Féin

I thank the Minister for his answer. Does he acknowledge that changes to the flat rate scheme will cause disruption to the beef sector and could significantly disadvantage our primary producers?

Photo of Edwin Poots Edwin Poots DUP

It should be less of an issue for primary producers. It is something that would have a more significant impact on beef finishers that have been in the scheme. Many of them will move out of the threshold very quickly, because, although their profitability and margins are quite low, their turnover is quite high. I suspect that that is why the Government are doing it: to ensure that the scheme, which is supposed to be a scheme to facilitate making the reclaiming of VAT easier, is cost-neutral. For some of the bigger operators, it is perhaps not cost-neutral. The scheme may have some impact, in that the finished price of beef may be reduced, because of the number of individuals involved who are required to store cattle. Generally, however, sheep and beef farmers will be able to avail themselves of the scheme, if they so desire ,because they will fall within the £150,000 turnover threshold .

Photo of Robbie Butler Robbie Butler UUP

Can the Minister tell us what underpinning schemes and information he has put in place to enlighten the farming community about these changes and the support available for those wanting to join the scheme?

Photo of Edwin Poots Edwin Poots DUP

That is being led by HMRC, and it is for it to inform those who are currently in the scheme that they will no longer be able to avail themselves of it. I believe that that has been the case. It is pretty well known within the sector that the scheme is changing at the end of the year. Many of those who have participated in it up until this point will no longer be able to, because of their turnover.