Tax ex­empt in­come for farm­ers

Bray People - - INSIDE BUSINESS -

A LANDOWNER who leases farm­land and farm build­ings for pe­ri­ods of ten years or more will be tax ex­empt on an­nual rents up to €20,000 pro­vided the landowner is aged 40 or more.

The ten­ant must not be a close rel­a­tive e.g. son, daugh­ter or spouse, un­cle, niece etc. The lease must be in writ­ing and the ten­ant must use the land for farm­ing. Any pay­ments re­ceived by the owner un­der the EU Sin­gle Pay­ment Scheme will also be treated as if they were rent where the land is let long-term and will be ex­empt from in­come tax.

There are re­duced ex­emp­tion lim­its for shorter leases. Thus, a lease for 7 years has a €15,000 per an­num ex­emp­tion and one for 5 years has a €12,000 per an­num ex­emp­tion. A per­son may have sev­eral ten­ants and it is the to­tal rent from them all that is sub­ject to the lim­its.

If a per­son wanted to let long-term a large farm it would be pos­si­ble to put half of the land in the name of the spouse and then sign two 10 year leases with their ten­ants. Each spouse would then have a €20,000 an­nual rental ex­emp­tion from tax.

Where a landowner has sev­eral leases, some long-term and some short­term, the rel­e­vant ex­penses must be at­trib­uted to each lease. It is the net profit from the long-term leases which is ex­empt and not the gross rent. It would be in­cor­rect to show all the rental ex­penses as at­trib­ut­able to short-term leases which are tax­able.

If a landowner does not wish to let the land but does not wish to farm it ei­ther the best so­lu­tion is to plant it with trees as a farmer get a higher rate of For­est Pre­mium than the non­farmer and the forestry in­come from all sources is free of In­come Tax sub­ject to an an­nual limit of €80,000 per spouse.

In prac­tise the limit of €80,000 will only be ap­proached or ex­ceeded at the clear-fell stage un­less the acreage is very large.

The prin­ci­pal dis­ad­van­tage with forestry is that it is so long-term. There is a re­quire­ment to re­plant or else re­pay the for­est pre­mium so that the land is gone from farm­ing for the owner's life­time. With about 20,000 for­est own­ers many farm­ers seem to have suc­cess­fully made the tran­si­tion to forestry.

If you want a short ro­ta­tion, say 10 year crop, try Christ­mas Trees which prof­its for the grower are also ex­empt from tax.

How­ever, there is a lot of skill, sci­ence and hard work to get a good crop and many crops have failed since the “non-shed” va­ri­eties were in­tro­duced over 20 years ago.

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