Budget 2014 – Taxation measures impacting the agricultural sector

Grant Thornton director Sasha Kerins has analysed the tax implications for farmers emanating from yesterday’s Budget 2014.

With regard to Capital Gains Tax Retirement Relief (CGT) she points out that existing retirement relief will  be extended in relation to the disposal of leased land in circumstances where, along with other conditions, the land is leased for at least five years and the subsequent disposal is to a third party other than a child of the owner. This measure is to incentivise older farmers to lease land, over the long term.

Where Vat is concerned, farmer’s flat-rate addition increased has been increased from 4.8 per cent to 5 per cent per cent with effect from 1 January 2014. The threshold for the ‘cash receipt’ basis for Vat purposes has been increased from €1.25m to €2m, effective from May 1st 2014. This will aid cash flow for Vat registered agricultural businesses falling within the higher limits.

Revenue will have the power to disallow input Vat for Vat registered businesses where associated supplies are not paid within six months – may impact farmers with seasonal cash flow.

In addition there will be a requirement to keep specific records where the Revenue Commissioners has reasonable grounds for believing that the records might assist in identifying Vat fraud. This may increase the burden of administration on farmers.

In terms of business incentives the introduction of “a start your own business” employment activation measure will provide a two-year exemption from income tax up to a maximum of €40,000 per year. This exemption will be available to individuals who have been unemployed for at least 15 months and start their own qualifying unincorporated business.

New measures for entrepreneurs will provide a CGT relief for individuals where they reinvest in assets used in a new productive trading activity for a minimum of three years. The investment period runs from 1 January 2014 – 31 Dec 2018 and CGT relief on disposal is the lower of 50 per cent CGT due on disposal or the CGT paid on previous disposal since 1 January 2010.

Sasha Kerins commented: “This new relief could assist private investment in farm related enterprises but we await publication of the detailed qualifying conditions to be published in the Finance Bill.”

With regard to Young Trained Farmers’ Reliefs yesterday’s Budget provides for a Stamp duty exemption and 100 per cent stock relief for young trained farmers. The scheme has been extended with an additional three courses added to the list of qualifying courses. The reliefs remain in existence until December31 2015.

Sasha continued: “Yesterday, Minister Noonan announced that, in conjunction with the Minister for Agriculture, Food and Marine, they will undertake an independent cost-benefit analysis of tax measures relating to this industry. There are a number of relieving measures that relate specifically to this industry that are likely to be analysed during this review.”

She concluded: Tax relief that was available for acquiring an interest in a partnership is to be abolished and withdrawn on a phased basis over four years. There will be no relief on new loans taken out from 15 October 2013.

“This may affect investments in acquiring an interest in farming partnerships. The establishment of a farming partnership would have been encouraged previously due to relieving measures introduced in recent budgets”.

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