Sell­ing en­ti­tle­ments may lose you money by 2019

Irish Independent - Farming - - News - Dar­ragh McCul­lough

FARM­ERS at­tempt­ing to ‘dou­ble up’ their en­ti­tle­ment pay­ments ahead of the new pro­gramme start­ing in 2015 will of­ten be worse off by 2019.

This is the stark con­clu­sion that can be drawn from the ta­ble be­low.

It shows that farm­ers look­ing to in­crease the value of their Sin­gle Farm Pay­ment by sell­ing their cur­rent en­ti­tle­ments to buy ones worth dou­ble the value stand to loose hun­dreds, and pos­si­bly thou­sands of euro in the process.

EX­PENSES

“Farm­ers think they are go­ing to dou­ble their money, but in re­al­ity most of them are go­ing to lose out big time,” com­mented Done­gal-based con­sul­tant, Brian Dolan.

“Be­cause the pur­chases and sub­se­quent in­come are not tax-al­low­able ex­penses, along with the fact that there is hefty Cap­i­tal Gains.

“Tax of 33pc on what­ever you get when you sell the en­ti­tle­ments, the vast ma­jor­ity of farm­ers will find that there’s ab­so­lutely no ben­e­fit from try­ing to trade up,” said the Creeslough­based con­sul­tant.

In our ex­am­ples, we look at three sce­nar­ios: a) A farmer with 20ha and en­ti­tle­ments worth €100/ha look­ing to trade up to the same num­ber of en­ti­tle­ments worth €200/ha; b) A farmer with 40ha and en­ti­tle­ments worth €100/ha look­ing to trade up to the same num­ber of en­ti­tle­ments worth €200/ha; c) A farmer with 20ha and en­ti­tle­ments worth €200/ha look­ing to trade up to the same num­ber of en­ti­tle­ments worth €400/ha.

In each case, the farmer ac­tu­ally stands to lose money. The amounts that they would lose would be sig­nif­i­cantly higher if the value of the en­ti­tle­ments or the ar­eas in­volved were higher.

We as­sumed in each case that the value of the en­ti­tle­ment was based on the amount it would qual­ify for in 2014.

This is ap­prox­i­mately 10pc higher than the 2013 value for all amounts over €5,000 in value.

EN­TI­TLE­MENTS

Mr Dolan pointed out that there were al­ways go­ing to be sit­u­a­tions where it does make sense for a farmer to buy en­ti­tle­ments, es­pe­cially where there were naked acres in­volved.

How­ever, none of th­ese cal­cu­la­tions taken into ac­count the im­pact of fu­ture CAP re­forms on the value of en­ti­tle­ments.

It is likely that en­ti­tle­ments that are still worth more than the na­tional av­er­age fig­ure af­ter all de­duc­tions in 2019 will be re­duced fur­ther in sub­se­quent re­forms of the CAP, which could re­duce the over­all value of higher value en­ti­tle­ments even more when com­pared to lower value equiv­a­lents.

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