The Minister for Finance has been asked to clarify if late Agri-Climate Rural Environment Scheme (ACRES) payments will have any tax consequences for farmers by Sinn Féin’s spokesperson for agriculture.
Deputy Claire Kerrane queried that in the case where a farmer receives two ACRES payments in 2024 would they then “be subject to a greater level of taxation than would otherwise have been the case had ACRES payments been paid in 2023 and 2024”.
The Minister for Agriculture, Food and the Marine confirmed last December that not all ACRES participants would receive their payments by the close of 2023.
Minister McConalogue said that because of “additional complexity associated with the co-operation (CP) stream” payments for ACRES CP participants would not be paid out until February 2024.
In a parliamentary question earlier this week Deputy Kerrane asked Minister McConalogue when farmers could expect to be paid this month.
But the minister did not provide a firm date.
“ACRES Co-operation Project payments are more complex to administer. Work is ongoing in this regard, with every effort being made to deliver payments as quickly as possible,” he said.
ACRES and tax
The Sinn Féin’s spokesperson for agriculture also asked the Minister for Finance, Michael McGrath, what the tax consequences for farmers might be as a result of the late ACRES payments.
Deputy Kerrane queried if this would result in farmers receiving “a lower level of after-tax support under ACRES”.
In response, Minister McGrath said this would depend on each individual farmers but in general payments in the form of income supports to farmers “are paid in respect of a full calendar year and taxed in that year”.
“ACRES payments will be subject to tax as income and will generally be taxed under Schedule D Case I as a receipt of a trade of farming.
“In the case of individual farmers, an ACRES payment will be subject to income tax and Universal Social Charge (USC).
“In general, payments in the form of income supports to farmers are paid in respect of a full calendar year and taxed in that year. However, in cases where the payment for the relevant year has not issued until the following year, the assessable income for tax purposes will be dependent on the basis of accounting adopted by the farmers,” the minister stated.
Farmers may either opt to use the “earnings basis” or “receipts basis” of accounting.
The minister said that using the earnings basis, the ACRES payment may be “recognised as a receipt accrued over the calendar year in respect of which it was paid”.
The minister added: “[E.g., in a case where a farmer’s accounts are made up to December 31 annually, the ACRES payment for the year 2023, regardless of when it is paid, will form a receipt of the year ended 31 December 2023 (2023 tax year).”
However, under the receipts basis the ACRES payment may be recognised as a receipt “pertaining to the date the payment is issued by the Department of Agriculture, Food and the Marine (DAFM)”.
Minister McGrath said: “[E.g.,] if accounts are made up to December 31 annually, the ACRES payment for the year 2023, if paid in February 2024, will form a receipt of the year ended 31 December 2024 (2024 tax year).”
He also warned that Revenue “reserves the right” to carry out reviews if anyone changes the basis on which their accounts are prepared.