Encouraging and attracting young farmers and new entrants into farming and land mobility, transfers via the market, whether by sale of long-term leasing, are among key focus areas in Ireland’s agricultural tax review, which is under way.
As the Minister for Finance, Michael Noonan, is set to meet with the Irish Farmers Association this afternoon to discuss this review of farming tax supports, AgriLand takes a look at what is currently in place to assist young dairy farmers to take over family-run farms from their parents.
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Key taxation measures to promote earlier lifetime transfer of holdings were retained in this year’s Budget and there was also amendments to the taxation code to assist young farmers to take over family-run farms from their parents.
Agricultural relief
Agricultural Relief is a relief from Capital Acquisitions Tax and operates by reducing the market value of ‘agricultural property’ by 90 per cent, so that gift or inheritance tax is calculated on an amount – known as the ‘agricultural value’ – which is substantially less than the market value. In general, the relief applies provided the beneficiary qualifies as a ‘farmer’. To qualify for agricultural relief, the person receiving the gift or inheritance must be a ‘farmer’ at the valuation date.
Stamp duty exemption on transfers of land to young trained farmers
This relief provides for a full exemption on stamp duty on transfers of farm land to certain young trained farmers. To qualify the young farmer must be less than 35 years of age and must of have attained a minimum agricultural education standard. This measure was extended in Budget 2012 for a further three-year period until 31 December 2015.
Enhanced stock relief from income tax
Enhanced rates of stock relief are provided for in certain circumstances – A 100 per cent stock relief rate is available for up to four years for certain young trained farmers. This measure was extended in Budget 2013 to the end of 2015. If a young dairy farmer has used the four-year window of claiming the 100 per cent stock relief, he/she can avail of a 50 per cent rate of stock relief if they participate in a registered Milk Production Partnerships. This measure was introduced until end of 2015 in Budget 2012.
Retirement relief from Capital Gains Tax
Retirement relief from Capital Gains Tax on land transfers is available where an individual over 55 years disposes of some or all of his land once certain criteria are met. There are two separate retirement relief thresholds depending on the relationship of the transferor to the transferee. Budget 2012 introduced the following changes to the “transfers of land to a child” thresholds with effect from the 1 January 2014, with the two-year lead-in period flagged in advance to allow for an orderly transition;
– Irrespective of the amount of consideration for the transfer, full CGT relief may be claimed by a person aged between 55-66 years of age on the transfer to his/her child.
– For land transfers by persons aged over 66 years of age the amount of full CGT relief is only available on considerations up to €3m, again to encourage earlier lifetime transfer of land holdings.
– If the child disposes subsequently of the land within six years, clawback of the above reliefs applies.
In addition to the tax reliefs the Department of Agriculture has also provided a range of on-farm supports, most of which were supported under the old common agriculture programme. These on-farm supports included:
– the New Entrants to Dairying Scheme, which helped revitalise the sector through the provision of milk quota to dynamic educated farmers;
– the Dairy Efficiency Programme, which encouraged the adoption of best practice management and production methods on farm by means of Discussion Groups;
– the Dairy Equipment Scheme, which had a weighting towards young farmers and had as its aim the encouragement of new entrants/young farmers in milk production by providing them with a financial support to meet the capital costs associated with either starting up or taking over a dairy enterprise, and ensuring that they have the most up to date technology available to compete in the modern dairy sector.
– the provision of financial support for Irish Cattle Breeding Federation and Animal Health Ireland to improve breed quality and animal health.
The new CAP Reform programme, which is very dairy focused, will facilitate the introduction of further supports in the areas of knowledge transfer and capital equipment and the Department of Agriculture is expected to announce more details on these supports over the coming months.
Meanwhile, the AgriTaxation Review under way aims to analyse the benefits of various tax measures to the agriculture sector and the wider economy versus the costs, simply put value for money.
The overall objective of the review is not to change the level of support to the sector through the tax system but rather to maximise the benefits to the sector and the economy for that existing level of support. And key focus areas are young farmers and land mobility.
The public consultation process for the review was launched this month and will run until Tuesday 25 March. It is planned that the review’s findings will form part of the Minister for Finance’s considerations in the context of Budget 2015.
Related: Land mobility a key focus in Ireland’s agri tax review