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Economics of buying a new Tractor

  • 06-02-2024 7:17pm
    Registered Users Posts: 451 ✭✭

    I know folks would advise buying one with a few years up as they would be a lot cheaper, but I cannot see the value in second hand Tractors, the prices have sky rocketed to the point that I'm think I'd be as well to buy new. I've a few questions with regard to buying a new Tractor,

    first is the VAT, I'm not VAT registered but can I still claim the VAT back?

    Is there straight prices vs trade in like with Cars?

    I guess I can depreciate the value of the Tractor over 8 years, (12.5% per year) but can I use a longer or shorter time frame?

    Also with regard to the depreciation am I correct in say I make 20k profit on the farm so saying a 70k tractor I'll have 8750 as an expense so now my profit is 11250

    Finally I'm finding it hard to get list prices of Tractors, is there any publication that has a list?



  • Registered Users Posts: 5,055 ✭✭✭Grueller

    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.

  • Registered Users Posts: 23,057 ✭✭✭✭mickdw

    Yes the profit will be reduced by 12.5 percent of cost of tractor each year for 8 years.

    If you get vat back, the 12.5% will be based on the before vat cost.

    Your actual saving will only be a percentage of that €8750 depending on your tax rate.

  • Registered Users Posts: 1,407 ✭✭✭cjpm

    Bass will be along shortly….

  • Registered Users Posts: 179 ✭✭KAMG

    You cannot get VAT back unless you register for VAT. Which would be an unusual thing to do, but some of our clients have been determined to do it, and have done. Its a right pain though for them and us.

    If you want to get a quicker write off against tax, you could go the lease route. A leased asset is written off against tax over the term of the lease. So it could be 5 years etc. However, from an accounting point of view, leased assets get messy when they are being got rid of. So I wouldn't advise this route personally.

  • Registered Users Posts: 241 ✭✭SodiumCooled

    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).

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  • Registered Users Posts: 179 ✭✭KAMG


    First is the record keeping needed and the extra time this takes. Then, the cost. If you are doing it yourself, grand. But if you are getting an accountant to do it, it could be anything from €500 to €1,000 a year extra. All depends on the level of receipts etc.

    Secondly, if VAT registered, it is the net of VAT expenses that are offset against net income. Most people prefer just claiming the gross cost of the expenses as an expense.

  • Registered Users Posts: 9,372 ✭✭✭Furze99

    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.

  • Registered Users Posts: 1,150 ✭✭✭weatherbyfoxer

    Makes sense for most beef sheep and tillage farmers to register for vat I reckon,claim vat back on everything you buy bar feed and fertiliser,Also claim back on vets and any other service provided on the farm

  • Registered Users Posts: 179 ✭✭KAMG

    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.

  • Registered Users Posts: 1,150 ✭✭✭weatherbyfoxer

    Not true in alot of cases, Alot of farmers don't know how much vat they pay out and most accountants aren't working in the farmers intreast but just what the minimum they are paid for

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  • Registered Users Posts: 179 ✭✭KAMG

  • Registered Users Posts: 2,512 ✭✭✭Cavanjack

    Finishing farm here. I worked it out for a couple of years and turns out we’d end up losing money if registered for vat.

  • Registered Users Posts: 8,194 ✭✭✭FintanMcluskey

    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

  • Registered Users Posts: 17,897 ✭✭✭✭Bass Reeves

    It might be but you will only buy a tractor on a beef farm every 10 years at the most. If you buy second hand machinery there is a premium paid for machinery that the vat can be reclaimed.

    I killed 60 cattle last year tg8e difference between purchase and selling vat is 3K ish, add accountant costs and it will be 3.5-4k.

    Silage contractor cost 3250 vat 387

    Plastic 1140 vat vat 215

    Accountant 1050 vat 75 euro

    500L tractor diesel 600 vat 83

    Car diesel 4500L cost 8100 euroX 0.66= 5346 vat 1k

    Digger hire 400 euro vat 48 euro

    Things like electricity and phone are miniscule when you take add backs into accounts. Probably less than 150 euro.

    Most lads buy second hand jeeps or van again you pay a premium for a vat that has a vat receipt

    Basically if you vat register you would want to have machinery disease.

    Contractors pay more than they claim back in vat

    As wellyou are more likely to have an audit so accountant will be more thorough about your accounts

    Slava Ukrainii

  • Registered Users Posts: 451 ✭✭Silverdream

    I'm not a fan of getting VAT registered just to buy a new Tractor, I'd take the hit on the VAT as it ends up being added to the value of the Tractor I would be depreciating over the 8 years. Also down the line when it comes to sell or trade it in then it can be sold without having to pay the VAT on the sale, however how does the accounting side of that work, say if you've depreciated a 70k Tractor to 0 on the books but then go on to sell or Trade it in for 35k 10 years later?

  • Registered Users Posts: 1,150 ✭✭✭weatherbyfoxer

    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

  • Registered Users Posts: 1,102 ✭✭✭Tonynewholland

    The 35k is still being taxed as you losing out on the full 80k write off.

  • Registered Users Posts: 451 ✭✭Silverdream

    Are you sure, this seems like a no brainier to that! So bassically I have a tractor on my farm at the moment that originally cost me 30k, I've written down the value to zero. I've made enquiries and it looks like I'll get around 13.5k in a trade in against a new one, it almost seems like free money. Sure if that is the case any farm should be trading their tractor as soon as it goes to zero value on the books. or am I looking at it the wrong way

  • Registered Users Posts: 4,470 ✭✭✭White Clover

    Was it the accountant made the error or how did they end up paying tax on the trade in?

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  • Registered Users Posts: 1,102 ✭✭✭Tonynewholland

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

  • Registered Users Posts: 1,150 ✭✭✭weatherbyfoxer

  • Registered Users Posts: 241 ✭✭SodiumCooled

    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.

  • Registered Users Posts: 241 ✭✭SodiumCooled

    There is a lot more that could be added to that - vet/doses etc, servicing and repairs (car, tractor, sheds (repairs are not supposed to be claimed for non registered farmers), insurance, every bit and bob you buy from the hardware/co-op basically which could be 1000’s at the end of the year when added up. I think if you were only around breaking even on it most years it might be worth it for the big purchases (tractor, trailer, changing the jeep every few years).

    as regards prices being higher with a VAT reciept - I know with crew cabs with I’m looking at a lot (2 or 3 years old) there might only be one with no VAT for every 20 plus VAT and they look for similar money as the vat included price. I know when we bought a tractor last anything we looked at (and the one we bought) was plus vat.

    I’m going to sit down and do some numbers on it myself anyway assuming a few decent machinery and vehicle purchases in the coming years along with the day to day and see how it looks over say 5 years or so.

  • Registered Users Posts: 17,897 ✭✭✭✭Bass Reeves

    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

    Post edited by Bass Reeves on

    Slava Ukrainii

  • Registered Users Posts: 179 ✭✭KAMG

    Not really. You think a person should get tax relief on €80,000 in this case?? If that was so, you would effectively be getting double tax relief on the original tractor which cost 35,000. Everyone would have fancy new tractors if that was the case.

  • Registered Users Posts: 179 ✭✭KAMG

    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.

  • Registered Users Posts: 1,876 ✭✭✭farawaygrass

    So if farmer a is non vat registered and buys a tractor, he pays the price of the tractor plus the vat, and the total can be depreciated.

    farmer b is vat registered so he only pays the price of the tractor.

    if both farmers go to sell their tractor after they fully depreciated it, does the buyer of farmer a’s tractor not have to pay vat but the buyer of farmer b’s does?

    you see adds on dd for jeeps/tractors etc and the ad say no vat. Does that mean you only pay the advertised price and can still depreciate it yourself or does it mean that’s the price and if not vat registered you have to pay the vat on top of it?

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  • Registered Users Posts: 1,876 ✭✭✭farawaygrass