Capital Gains Tax exemption arising from forced disposal of SFP entitlements announced

Minister for Finance, Michael Noonan, today announced his intention to provide a capital gains tax (CGT) exemption in this year’s Finance Bill to certain farmers who dispose of their Single Farm Payment entitlements on foot of changes being introduced under the new EU Common Agriculture Policy (CAP).

A technical change made at EU level to the new CAP arrangements for replacing the Single Payment Scheme for farmers with the Basic Payment Scheme after this year impacts on farmers who let 100% of their farmland and their Single Farm Payment entitlements.

As a result of the change, farmers in this position will lose their farm payment entitlements and the Department of Agriculture, Food and the Marine has advised those farmers to sell those entitlements to active farmers by May 15 (the deadline by which the change takes effect). Sales of farm payment entitlements in these circumstances will give rise to tax liabilities, mainly CGT but possibly VAT in a limited number of cases.

Commenting on his decision, Minister Noonan said: “This issue has been raised with me by Simon Coveney, the Minister for Agriculture Food and the Marine. The change to the new Common Agriculture Policy which impacts on those farmers who lease 100% of their land and farm payment entitlements was made in circumstances where those farmers could not prepare for the change, having already entered into their leasing arrangements.

“They are therefore caught between either having to sell their farm payment entitlements or losing them under the new CAP, neither being options those farmers would otherwise have taken. In these circumstances, I am prepared to provide for an exemption from CGT on any chargeable gains arising from the disposal by the owners of payment entitlements under the Single Payment Scheme where all of those entitlements were leased out in 2013 and where the owners, because of the change in CAP regulations, were advised by the Department of Agriculture, Food and the Marine, to transfer their entitlements to an “active” farmer by May 15, 2014.”

IFA President Eddie Downey has also welcomed the Ministers decision. He said: “IFA identified the taxation problem that was faced by over 6,000 farmers who are being forced to dispose of their Single Farm Payment entitlements in 2014, due to having leased out all of their land and entitlements in 2013. I made it clear to the Minister for Agriculture, Simon Coveney, that these farmers were facing a tax bill due to the new Direct Payments regulation and that an exemption had to be provided”.

He continued, “It is critical that this exemption extends to all affected groups. It must include those who are disposing of their entitlements to a third party and those who must transfer their entitlements into their own company”.

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