Bud­get small print re­vealed in Fi­nance Bill

Irish Examiner - Farming - - FARM FINANCE - Kieran Cough­lan www.cough­lanac­count­ing.com

The Fi­nance Bill was pub­lished last week.

It is the le­gal frame­work to im­ple­ment the bud­get an­nounce­ments, and re­quires rat­i­fi­ca­tion from the Dáil, the Seanad, and fi­nally the Pres­i­dent be­fore com­ing into law. Usu­ally the process takes five or six weeks, with last year’s bill passed into law on Christ­mas Day. Ef­fec­tively, some tax mea­sures come into ef­fect on bud­get night, some come into ef­fect on the pass­ing of the Fi­nance Bill into law (the day the bill is en­acted by the Pres­i­dent).

Some mea­sures come into ef­fect from Jan­uary 1, where that is specif­i­cally men­tioned as the start date in the leg­is­la­tion.

Yet more mea­sures can come into ef­fect at an even later date, if sub­ject to a min­is­te­rial or­der, or where such mea­sures re­quire EU state aid ap­proval.

The Fi­nance Bill has given us the pro­posed le­gal text on the var­i­ous farm tax and other tax mea­sures an­nounced in the bud­get. For in­come av­er­ag­ing, the Fi­nance Bill sets out that some of the cur­rent re­stric­tions in re­la­tion to in­come av­er­ag­ing are to be lifted. Av­er­ag­ing is cur­rently not avail­able for self-em­ployed per­sons who carry on an­other off-farm trade or pro­fes­sion, or whose spouse/civil part­ner caries on an­other trade or pro­fes­sion, or where ei­ther per­son is a direc­tor of a trad­ing com­pany and hold­ing more than 25% of the shares in that com­pany.

The change in the rules for in­come av­er­ag­ing will be of no ben­e­fit to farm­ers this year, many of whom face rel­a­tively high tax bills com­ing off the bank of a suc­cess­ful 2017. In­come av­er­ag­ing al­lows el­i­gi­ble farm­ers to cal­cu­late their tax­able in­come as the av­er­age of their in­come in the cur­rent year and the previous four years, on a rolling ba­sis, thus smooth­ing their tax li­a­bil­ity over a five-year cy­cle. The main dis­ad­van­tage of av­er­ag­ing still ex­ists, that in years of lower in­come, the av­er­aged tax li­a­bil­ity is higher than it would have been were the farmer out­side the in­come av­er­ag­ing scheme and pay­ing tax on their ac­tual in­come.

But, at least, a farmer will know with a high de­gree of cer­tainty what his or her tax li­a­bil­ity is likely to be in the com­ing year.

The pro­vi­sions deal­ing with a claw­back af­ter an opt-out of av­er­ag­ing can be par­tic­u­larly oner­ous, and many farm­ers are slow to com­mit to av­er­ag­ing for fear of a high fu­ture claw­back in the event of an opt-out or de­fault out of av­er­ag­ing.

The an­nounce­ment of the ex­ten­sion of in­come av­erag- Char­tered tax ad­viser Kieran Cough­lan, Bel­go­oly, Co Cork. (086) 8678296 ing to farm­ers with off-farm in­come is wel­come none­the­less, and adds to a num­ber of al­ter­ations to in­come av­er­ag­ing over the past few years de­signed to make it more ac­ces­si­ble and func­tional for farm­ers. Im­por­tantly, farm­ers who have not de­clared prof­its for five con­sec­u­tive years, in­clud­ing young farm­ers in their first four years of farm­ing, con­tinue to be pre­cluded from ac­cess to av­er­ag­ing.

The 25% gen­eral stock re­lief on in­come tax; the 50% stock re­lief on in­come tax for reg­is­tered farm part­ner­ships; and the 100% stock re­lief on in­come tax for cer­tain young trained farm­ers are all ex­tended to De­cem­ber 31, 2021.

The Fi­nance Bill has also seen the in­tro­duc­tion of a cu­mu­la­tive life­time cap of €70,000 which will ap­ply to the amount of tax re­lief/credit en­joyed by a farmer un­der the young trained farmer stamp duty re­lief, the stock re­lief for young trained farm­ers, and the suc­ces­sion farm part­ner­ships tax credit.

In prac­ti­cal terms, this means that young trained farm­ers can ef­fec­tively only avail of the stamp duty ex­emp­tion where the land trans­ferred has a value up to €1,166,666.

For any land trans­ferred in ex­cess of this value, it may be pos­si­ble to avail of con­san­guin­ity re­lief, al­beit that re­lief is due to ex­pire on De­cem­ber 31, 2020.

There may be fur­ther clar­ity on this mea­sure though Oireach­tas ques­tions to min­is­ters over the com­ing weeks.

Young farm­ers who ex­pect to re­ceive a gift of land or who are in the process of pur­chas­ing land should ob­tain pro­fes­sional tax­a­tion ad­vice in ad­vance of the pass­ing of the Fi­nance Bill.

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