Finance Bill 2018 details amendments to certain farming reliefs

Finance Bill 2018 was published earlier today (Thursday, October 18) by the Minister for Finance and Public Expenditure, Paschal Donohoe.

The bill, which runs to 61 sections, implements the taxation changes announced on budget day – as well as introducing some necessary anti-avoidance measures and technical changes to the tax code.

Commenting on the publication of the bill, Minister Donohoe said: “The Finance Bill 2018 sets out the legislative provisions to bring effect to the tax measures announced in Budget 2019 as we build resilience in our economy and work to further support its long-term growth.

We are doing this by balancing the books, making steady and sustainable investment in day-to-day services and putting money back in people’s pockets in a way that is affordable for the state.

“The bill also contains a number of anti-avoidance and administrative changes to the tax code in order to protect and enhance the integrity of our tax base. I look forward to bringing this important legislative instrument through the Oireachtas over the coming weeks.”

Stamp duty

Section 46 of the Finance Bill 2018 provides for the extension of the young trained farmer stamp duty relief for a further three years – up until the end of 2021.

This relief provides for a full exemption on stamp duty on transfers of farmland to certain young trained farmers.

This exemption from stamp duty is designed to encourage the transfer of farmland to a new generation of farmers with relevant qualifications. The transfer may be by way of gift or sale.

In order to be eligible, the farmer must be under the age of 35 on the date of the deed of transfer and must also have attained one of the necessary qualifications.

The young trained farmer must also, for a period of five years from the date of execution of the deed of transfer:
  • Spend not less than 50% of his/her normal working time farming the land;
  • Retain ownership of the land.

Transfers by way of lease, or where a power of revocation exists, will not qualify for the exemption.

Details not announced in Budget 2019

Some additional measures were added to the Finance Bill 2018 that were not announced by the minister on budget day.

Section 46 of the bill is also being availed of to bring the legislative provisions that deal with the young trained farmer stamp duty relief and the stamp duty farm consolidation relief into compliance with the EU state regulations that apply to them.

These provisions include requiring that a business plan is provided to Teagasc before a newly qualified young trained farmer can receive a refund of the stamp duty he or she is paid in the course of a previous purchase of land.

As well as that, a cumulative lifetime cap of €70,000 will apply to the amount of tax relief/credit that can be enjoyed by a farmer under the young trained farmer stamp duty relief, the stock relief for young trained farmers and the succession farm partnerships tax credit.

Provisions will also include a number of other technical changes to the legislation governing the young trained farmer stamp duty relief and the stamp duty farm consolidation relief to ensure they are State aid compliant.

Income averaging and stock relief

Meanwhile, the bill also includes details of the income averaging and stock relief changes announced as part of Budget 2019.

Income averaging allows eligible farmers to calculate their taxable income as the average of their income in the current year and the previous four years, on a rolling basis, thus smoothing their tax liability over a five-year cycle.

At present, certain farmers are not entitled to avail of the income averaging regime as they, or their spouse, or their civil partner earns another income off-farm.

The amendment recently announced by Minister Donohue will extend the scheme out to such farmers, with averaging only applying in respect of farm profits. This measure will increase the number of farmers who are able to avail of the scheme.

Furthermore, stock relief is a relief from income tax in respect of increases in the value of a farm’s trading stock. It is allowable as a deduction of a defined percentage amount of the increase in the value of trading stock at the end of an accounting period, over and above the opening value.

The 25% general stock relief on income tax, the 50% stock relief on income tax for registered farm partnerships and the 100% stock relief on income tax for certain young trained farmers were due to expire December 31, 2018.

However, these long-standing reliefs have been extended out for a further three-year period thanks to an amendment announced by Minister Donohue on budget day.