Could tax liabilities arise from leased land entitlements?
Following the announcement by the Minister for Agriculture, Food & Marine regarding the rules in relation to the Single Farm Payment entitlements leased with land, the President of ICMSA has said that in order to resolve what he called “significant dilemmas” that have arisen as a result of the CAP Post-2013 agreement, the Minister should seek taxation exemptions to allow sensible land leasing arrangements in place over many years to continue without the incurrence or imposition of significant tax liabilities. Mr. Comer said that the transaction to resolve the issue could be subject to Capital Gains Tax, Capital Acquisitions Tax and VAT depending on the circumstances.
“The leaser may be subject to Capital Gains Tax at 33% depending on his or her circumstances, the leasee could be subject to Capital Acquisitions Tax at 33% depending on his or her circumstances and the transaction could be subject to VAT at 23% if the value of entitlements sold exceeds €37,500. While exemptions for certain farmers already apply for some of these taxes in certain cases, there needs to be a special exemption for all farmers impacted upon by this change”.
Mr. Comer said that it’s essential that farmers who rely on rented-leased land to run their farm will be able to continue these arrangements but that the reality, as of now, is that certain farmers find themselves in a situation where – due to no fault of their own – neither the leasor or leasee will be able to draw the entitlements under the new system. He said that while his organisation welcomed the Minister’s statement that each affected individual, both leaser and leasee, will be written to regarding the situation but he noted that the Minister must do more to help the individuals concerned.
“While a solution to this problem has been identified by the Department, there may be significant taxation implications if the farmers affected opt for this solution, and given that this problem is an unforseen outcome of the CAP Post 2013 agreement, ICMSA believes that the Minister for Agriculture, Food & Marine should seek agreement from the Minister for Finance for a special exemption to taxation on such transactions so that leasees can continue to lease the land and minimise the threat to their farm businesses and also in the context of the Food Harvest 2020 targets. The possibility of tax liabilities will cause problems for certain individuals and the Minister should move immediately to resolve possible taxation problems caused by the decision taken” concluded Mr. Comer.