Ifac’s Top 12 tax saving tips for farmers

Because every farmer is different there’s no catch all solution for saving on tax. However, there’s a long list of tax-saving tips that can reduce taxable income. Farmers should use every available tip because over-looked tax deductions are wasted opportu

Stamp Duty and Land Stamp duty is a tax charged on the transfer of property. In general the only factor affecting the amount of stamp duty charged is the value of the property/ land. The transfer of livestock, machinery and basic payment entitlements are not subject to stamp duty. The rate of stamp duty applicable to residential property is 1% on the first € 1m, and 2% on the excess over € 1m. Stamp duty on non- residential property is 6%. 1. Blood relative relief: Stamp duty relief has been enhanced so that any transfer of farm assets between blood relatives is subject to 1% stamp duty instead of the new 6%. Age restrictions on this relief have been removed. Other conditions still remain and should be reviewed before any transfers takes place. 2. Young trained farmer relief: This exemption from stamp duty is to encourage the transfer of farm- land to a new generation of farmers with relevant qualifications. The transfer may be by way of a gift or sale. It applies where the young trained farmer is under 35 at date of the transfer. Young trained farmers must have the relevant agricultural qualifications or must acquire the qualifications within four years from the date of execution of the transfer instrument. The young trained farmer must spend 50% of their time farming the land to qualify. The exemption is extended to 31 December 2021 but with onerous conditions from 1 January 2019 including the relief is aggregated with young trained farmers stock relief and in total the maximum relief is limited to € 70000. In addition, it is limited to a start- up / transfer and a business plan must be submitted. Value-Added Tax ( VAT) Farmers and farming companies do not have to register for VAT, irrespective of turnover. Farmers are entitled to apply a flat- rate addition of VAT ( 5.4%) to their prices when supplying agricultural produce or services to VAT registered customers. Flat- rate farmers are also entitled to reclaim VAT on certain capital expenditure. 3. Capital expenditure VAT refund: Farmers who are not registered for VAT can get a refund on the VAT element of any invoices relating to capital expenditure, for example land improvement, yards, fencing, drainage or buildings and fixed equipment, such as milking parlours, scrapers, bulk tanks, etc (repairs are not covered). You can claim VAT back on items purchased in the last four years. Capital Gains Tax If a farmer disposes of certain assets such as land, buildings, quotas, shares or entitlements, he or she may be liable to capital gains tax. The farmer must file a return for any 2018 gains or losses by the return filling date in 2019. 4. Transfer of a site to a child: A site of up to one acre and up to a value of € 500,000 can be made free from capital gains tax. It must be for the construction of the child’s principal private residence. If the house is not built and the site is disposed of or the house is not built, the relief can be clawed back. Beware of the value of the site as this will reduce the threshold for gift tax. 5. Entrepreneur Relief: Entrepreneur relief reduces the standard rate of capital gains tax from 33% to 10% for qualifying gains. The value of this relief can be up to € 230,000. You can claim entrepreneur relief if you sell all or part of a farm business. It applies on gains up to € 1m. Entrepreneur relief does not apply to investments or development land. 6. Retirement Relief: This relief is available to farmers over the age of 55. The farmer does not need to be retired to avail of it. The farmer must have owned and farmed the land for 10 consecutive years prior to transfer or prior to entering into a letting/ leasing agreement. There are two main versions. Within the family, farmers can transfer/dispose of chargeable business assets. Provided certain conditions are met, no capital gains tax will apply. If you are over 66, a limit of € 3m applies. For nonfamily transfers, or transfers to unrelated parties, a farmer can transfer/ dispose of assets up to € 750,000 and have no liability. If you are over 66, the limit is reduced to € 500,000. 7. Restructuring Relief: If you acquire and dispose of agricultural land within 18 months of the earlier transaction, a capital gains tax relief applies. The sale, purchase, swap must be between farmers who spend no less than 50% of their time farming. Gift Tax Gift tax applies to a lifetime transfer. Inheritance tax applies to a transfer on death. Where the valuation date is between 1 January and 31 August, the CAT Payment date is between 1 September and 31 January, the CAT payment date is between 1 September and 31 October in the following year. 8. Annual exempt amount: A farmer can receive by way of a gift an amount of € 3,000 from any person in a calendar year without affecting his or her threshold. No gift or inheritance tax applies between spouses. 9. Agricultural Relief: This relief reduces the value of the asset you are receiving by go%. If you receive € 2m of agricultural property you will only be taxed on € 200,000, ie 10% of its value. Ensure you meet the conditions to qualify for this relief. Beware clawback of the relief if you fail to satisfy the conditions. The recipient must qualify as an active farmer to receive this relief. 10. Business relief: If you do not qualify for agricultural relief, business relief may be available. It applies to the transfer of a business or part of a business. It does not apply to an individual asset. It reduces the value of the asset by 90%. 11. Favourite Niece or Nephew: In certain circumstances, a nephew or niece who has worked on a full-time basis on the farm will be deemed to qualify as your child for the purpose of CAT. If they qualify, they can avail of the CAT Group A threshold. Income Tax 12. Ensure you are availing of all the credits you are entitled to. These reduce the amount of tax that could otherwise be payable.