There will be no Capital Gains Tax (CGT) implications people moving to joint herd numbers or entering partnerships during the 2015 scheme year and prior to the closing date of the Basic payment scheme, the Minister for Agriculture has announced.
Simon Coveney today announced details of the tax treatment of entitlements in the context of the transition from the Single Payment Scheme to the Basic Payment Scheme that takes effect in 2015, having consulted with the Department of Finance and the Office of the Revenue Commissioners.
“I am pleased that, following consultation with the Department of Finance and the Office of the Revenue Commissioners, I am in a position to clarify that there are no CGT implications for those moving to joint herd numbers or entering partnerships during the 2015 scheme year and prior to the closing date of the Basic payment scheme.”
Entitlements were established in 2005 with the introduction of the Single Payment Scheme and expired on 31 December 2014 when that Scheme came to an end.
New entitlements will be established under the Basic Payment Scheme following the scheme closing date of May 29 for farmers who submit a valid 2015 Basic Payment Scheme application, declare eligible land and fulfil all other eligibility criteria pertaining to the Scheme.
The principles relating to the taxation of direct payments laid out in Tax Briefing Issue 61 of 2005 still apply.
As with entitlements held under the Single Payment Scheme (SPS), entitlements disposed of under the Basic Payment Scheme will be classified as an asset subject to Capital Gains Tax (CGT). However the base cost for Capital Gains Tax purposes of entitlements established under the Basic Payment Scheme is zero.
As BPS entitlements will be established at the closing date, no disposals of entitlements can take place before that date. Therefore, there will be no CGT implications for those moving to joint herd numbers or entering partnerships during the 2015 scheme year ie. prior to the closing date of 29th May 2015.
This will have no practical effect on those who have held their entitlements since 2005, when the base cost was also zero.
According to the Department, this is of particular relevance for those participating in the Young Farmers Scheme or the National Reserve as a ‘young farmer’ or ‘new entrant’.
Many such farmers have applied for joint registration on a herdnumber, in many cases through the addition of a son or daughter to a parent’s herdnumber. For those moving to joint herd numbers or entering partnerships during the 2015 scheme year, no transfer of entitlements takes place and consequently no capital gains will apply.