Budget 2019: How will Income Tax impact on farmers?

In the lead-up to Budget 2019, two factors were at play. Firstly, the Government had to be mindful of the Confidence and Supply Arrangement it has with Fianna Fail.

In this regard, there could be no surprise or last-minute announcements.

Secondly – and more tellingly – in spite of numerous denials by all parties, it is clear a general election will occur in the short term.

Both the Government and Fianna Fail will have had one eye on the impact the budget changes will have on their support base and how those announcements will impact on, and be received by, their voters.

In the first few paragraphs of the budget speech – while the minister referred to state income and expenditure running into the billions – he stated that his intention in this budget was to deliver a tax package of €219 million.

In an overall context, this is a modest amount and, as a result, the Income Tax amendments and indeed, tax amendments under all tax heads, were minimal.

His direction to extend Stock Relief and Income Averaging Relief has no real immediate advantage to farmers. It will allow them to continue with a relief that has existed for many years.

The tax bill for the sole trader farmer will be slightly reduced due to the modest increase in the single rate band; the earned income credit for the self-employed; the home carer’s credit for stay at home parents who qualify.

Modest impact

These changes have a modest impact. When the figures are noted for self-employed farmers across all income levels, from €12,000 per year to €175,000 per year, and between single and married persons, the monetary savings per year (including Income Tax, PRSI and USC) varies between €212 and €820.

Agri finance and taxation experts FDC Group will examine any and all means of reducing the tax cost to the client.

It is noted that the minister made no change to Corporation Tax of 12.5%; he reaffirmed the Government’s commitment to that rate.

In FDC Group, the team continues to incorporate farm trades in a way which minimises the Income Tax cost for the farm owner through the use of livestock and machinery transfer to the company and creation of a director’s loan.

FDC Group will now focus on any advantages that can be gleaned from the Budget amendments which can bring benefit to its clients.

The consultancy firm welcomes the reference to Income Averaging relief being made available to farmers who have off-farm income (which was not the case heretofore).

This will allow many others to consider the advantage of spreading the tax cost over a period of years.

Comments on EII relief and the intention to reassess it have also been noted. Up to November 2017, this relief had been used to great advantage by FDC to fund investment by farmers in their own farm companies.

FDC Group will watch carefully the legislative wording on this matter to see if farmers can obtain a new advantage from it.

Potential opportunities

The team will consider the re-emphasis on film relief and whether it can be used as a vehicle to shelter tax liabilities.

The group also notes the introduction of accelerated capital allowances for gas-propelled vehicles; this may encourage the marketplace to develop products and opportunities for its clients.

While the Budget introduced modest income tax changes, the team in FDC Group prides itself in applying the full expertise and ingenuity of its staff to create tax-saving opportunities for all its clients.

FDC has created in-house skills in the area of accounting; taxation; financial services; and agri-advice – and done so in a way which allows for the application of these skills in a concerted manner.

While the budget is only a statement of intent, the publication of the Finance Bill is now awaited on October 18. From the wording of this bill, FDC Group will identify those opportunities. To find out more about FDC Group, click here