More of a damp squib than a ‘Eureka Budget’
From a farming perspective, the pronouncement of Budget 2018 passed off as a damp squib rather that a eureka moment.
The goodies came in the form of an increase to the “earned income tax credit” available to the self-employed including farmers who otherwise do not benefit from a PAYE tax credit.
The increase in the earned income credit to €1,150 falls far short of previous commitments by Fine Gael to increase the Earned Income Tax Credit from €550 to €1,650 for the self-employed, to match the PAYE credit, by 2018.
Having started well in 2016 at a rate of €550, it was expected that successive budgets in 2017 and 2018 would incrementally rise the credit by €550 each year. The credit was increased by €400 for year 2017, and by a relatively small amount of €200 for 2018.
Also in the income tax area, persons earning more that €33,800 will benefit from the increase in the lower rate tax band to €34,550, the tax saving here will be €150. Looking at USC, farmers will benefit from the reductions in the rates of Universal Social Charge. A farmer earning €40,000 taxable profits per year will save a modest €103 in USC. There were no changes to the rates of PRSI.
A new carve-out was announced in respect of farmers engaging in solar energy projects.
Under current rules, a farmer who engages in a lease with a solar developer could forfeit their ability to pass on that land, or sell that land exempt from CGT. Similarly, beneficiaries Chartered tax adviser Kieran Coughlan, Belgooly, Co Cork. (086) 8678296
who receive a gift of land occupied by solar panels would not be able to claim agricultural relief, meaning that gift or inheritance tax could apply at 33% on the value of the property.
The budget documents announced that ‘for the purpose of CAT agricultural relief and CGT retirement relief, agricultural land placed under solar infrastructure will continue to be classified as agricultural land, but with a condition restricting the amount of the farmland that can be used for solar infrastructure to 50% of the total farm acreage’. The Finance Bill and subsequent Finance Act should provide clarity on how this new relief will apply.
One of the major tax increases announced by the budget is the rise in the rate of commercial stamp duty from 2% to 6%. Commercial stamp duty rates apply also to farm land transactions, meaning that the purchase of farm land will be more expensive, because of the increased stamp duty cost.
The new rate applies in respect of transactions completed on or after October 11. In the Dail on Tuesday evening, an amendment proposed by Independent TD Michael Fitzmaurice, which would exclude agricultural land from the increase, was defeated, when 64 TDs voted in favour of the 6% commercial stamp duty, with 31 in opposition and a further 41 abstaining.
The government hopes to raise €375 million from the stamp duty increase.
The Government have clarified that the reduced rate of stamp duty of 1% applicable to transfers between certain relatives (transferor under 67) will continue to apply until 2020. The exemption from stamp duty for young trained farmers also continues to apply.
A major disappointment imn the Budget was the failure to provide a farm deposit scheme to address the income volatility which has become much more pronounced in recent years.
With the prospect of Brexit having a severe impact on farm incomes in the coming years, it was particularly disappointing that measures weren’t introduced now to facilitate farmers taking proactive measures to protect their income. Likewise, there was an opportunity to allow farmers and other self-employed persons write off expenditure on assets over a time-frame that suited their business needs, rather than the prescribed eight-year period. But there was no movement on this. Farmers will again get access to a low cost loan scheme during 2018, a repeat of the hugely successful and much over-subscribed Agri Cashflow Support Loan Scheme. An increase in the National Training Fund levy of 0.1% will add to employer costs. The National Training Fund levy is effectively incorporated into the employer’s rate of PRSI of 10.75%.