Taxman targets Kerry farmers

HUNDREDS of Kerry farmers have received letters from Revenue demanding thousands in tax on shares issued them by Kerry Co-op.

Revenue has set up a special task force in Tralee to investigate whether suppliers are tax compliant, The Kerryman can reveal.

400 dairy farmers in the co-op have received letters demanding payment for loyalty ‘patronage’ shares issued them in 2011, 2012 and 2013 - on the rate of one share per 1,000 gallons of milk supplied.

Revenue is now treating the share scheme as trading income subject to income tax, USC and PRSI in a massive blow to farm incomes in Kerry before Christmas. Some farmers estimate their liability based on the fresh Revenue claims might be in excess of €20,000 - and they have just 21 days to respond to the taxman.

“There is real, serious concern among members affected at present and this could not be coming at a worse time... we will be meeting in the coming days to explore further what it means for members,” Kerry ICMSA chair Mike Teahan said.

He said many farmers had only just settled tax accounts with borrowed money.

HUNDREDS of Kerry farmers reeling from Revenue’s demand for payment of tax arrears it claims they owe the State are frantically scrambling this week for answers as to why their ‘patronage’ shares of Kerry Coop are suddenly being treated as income.

400 milk suppliers were hit with letters from Revenue on Monday informing them of fresh tax liabilities based on their holding of ‘patronage’ shares in Kerry Co-op - loyalty shares given them by the Coop based on the rate of one share per 1,000 gallons of milk supplied.

The scheme is in operation since 2000, but Revenue referred to three years in the letters it hit farmers with on Monday - for shares given out in 2011, 2012 and 2013 on which it claims tax arrears are owed.

Newly-appointed chairperson of the Kerry branch of the Irish Creamery Milk Suppliers’ Association (ICMSA) Mike Teahan told The Kerryman there is now ‘real serious concern’ among affected members at a time when many had just borrowed from banks to meet last year’s tax liabilities.

Tax was demanded based on the patronage or ‘free’ shares issued to suppliers being treated as additional trading income, rather than assets - and as such subject to income tax, USC and PRSI.

Its valuation of the shares represents a significant discount on their nominal value of 6.15 Kerry Group PLC shares.

The Co-op now holds 24 million shares of the publicly-traded multinational following the last ‘spin-out’ of its Kerry Group stake - equivalent to 13.7 per cent of the giant.

With four million shares in the Co-op, each of its shares represents 6.15 shares in Kerry Group - worth €400 each on the current PLC share price. But this value could only be realised based on another spin-out The Kerryman understands.

Revenue has now valued the Co-op shares at €65 for 2011; €75 for 2012 and €90 for 2013.

“Based on this it’s likely that some suppliers could be facing a tax liability of over €20,000,” Mike Teahan told The Kerryman.

“There is real, serious concern among members affected at present and this could not be coming at a worse time. It’s early days yet so we know very little, but we will be meeting in the coming days to explore further what it means for members.”

Mr Teahan said that many farmers had only just recently satisfied last year’s Revenue demands: “A lot of farmers had to borrow from the banks to pay their tax.”

He queried why the patronage shares should now be treated as part of the income stream.

This is the big question affected farmers are now asking; why they should be forced to pay tax on shares they merely hold rather than shares traded?

With 3,200 Kerry Group milk suppliers in the Co-op it is feared that more nasty Christmas surprises could be in store. There are also numerous ‘dry’ shareholders who no longer supply but hold shares in Kerry Co-op issued over the years.