Revenue outlines tax measures for farmers in July stimulus package

Revenue has outlined how the tax measures laid out in the July stimulus package will affect farmers and the self-employed.

In a statement at the end of last week, Revenue said the measures provide an option for farmers to ‘step out’ of income averaging for the tax year 2020, notwithstanding that the farmer may also have stepped out of income averaging in one of the four preceding tax years.

In other words, a farmer can elect to pay tax based on the actual profits for 2020, rather than on averaged profits.

Revenue said that a farmer may wish to do this if the actual profits for the year are lower than the average profits which would otherwise be assessed to tax.

Where a farmer makes such a decision, tax due on the average profits that would have been taxed in 2020 is deferred.

More generally, for self-employed people whose trade or profession was profitable in 2019 but made losses in 2020, they can claim to have those losses, and certain unused capital allowances, ‘carried back’ and deducted from their profits for the 2019 tax year.

An individual may make this claim for income tax relief by amending their Form 11 tax return for 2019.

A €25,000 limit applies on the total amount of losses and capital allowances that can be carried back. An additional limit applies where the person is subject to the High-Income Earner Restriction.

Someone who incurs – or who reasonably expects to incur – a loss during 2020 can accelerate the timing of the income tax relief by making an interim claim, based on an estimate of the amount of the relief that will be available.

That person will be able to revise their interim claim as the year progresses – including increasing the claim where it is estimated that the loss will be greater than expected.

To be eligible to make an interim claim, the person concerned must:

  • Have filed the Form 11 for 2019;
  • Be compliant with all obligations under tax legislation in relation to the payment of taxes and the filing of returns (people that avail of debt warehousing, and/or agree a phased payment for outstanding debt that does not qualify for warehousing, will be treated as having complied with payment obligations relating to tax covered by those arrangements);
  • Make a declaration that they have incurred a loss, or expect to do so.