Tax bombshell for hundreds of Kerry milk suppliers

Hundreds of Kerry milk suppliers are up in arms following their receipt of tax demands from the Revenue linked to ‘patronage shares’ issued to them by Kerry Co-op during the period 2011 to 2013.

Speaking to Agriland, one Kerry supplier said that he received shares on a pro rata basis, tying in with the volumes of milk he supplied.

“The offer worked out at one share per 1,000 gallons of milk produced across each of the three years. I have no idea what value can be attached to them.

“But I kept all the shares issued to me, so I don’t see how this process can be considered as a form of business revenue generation.

“I could understand me having to pay tax, had I sold any of the shares on, but this is not the case.”

A number of Kerry suppliers have contacted Agriland, confirming tax demands ranging from €15,000 to €30,000.

In a letter received by what is believed to be 400 Kerry suppliers the Revenue points out that the intervention is being conducted as ‘Aspect Inquiry’.

The letter continues:

“This affords you the opportunity of making an Unprompted Voluntary Disclosure under the Code of Practice and other Compliance Interventions, thereby minimising potential penalties together with avoiding  publication and prosecution if all conditions attaching to making such a disclosure are met.

“To enable you to avail of the opportunity to make such a disclosure, please respond with your computation of the tax liability together with the appropriate payment.”

Significantly, the Revenue has declared that the patronage shares must be regarded as trading income and subject to income tax, USC, and PSRI. Moreover, the scale of these liabilities must be based on the market value of the shares, not their par value. The recipient farmers have been given 21 days to reply.

Revenue has confirmed that it is aware of certain milk suppliers receiving patronage, or free shares, in proportion to the quantity of milk supplied to a co-op.

Such shares should be included as trading income subject to income tax, USC and PRSI based on their market value when received.

The Revenue letters advise the shareholders of the possible tax liability in relation to the value of free shares received and giving an opportunity to come forward now and pay any income tax due in this matter.

According to Revenue sources, the letters arise as compliance interventions in the context of the organisation’s risk framework and the advice for anyone who has received a letter, or anyone who has received such shares, is to engage with Revenue staff and address the issues raised.

Commenting on these developments ICMSA President John Comer said that his organisation has been receiving many calls from hugely concerned members regarding an “out of the blue” tax demand from the Revenue Commissioners.

“This has happened in a year that has already been difficult for dairy farmers. ICMSA is currently examining the position and will be seeking further clarification from Revenue, given the very serious consequences for individual farmers.”