WHILE the minister’s annual Budget speech attracts a lot of media attention, it is the subsequent Finance Bill and Finance Act which are of far greater interest to the tax professional. The Finance Bill was published on October 18th last and, like the Budget, it was not a very controversial document.
The Finance Bill confirmed the changes to income averaging to remove the restriction on claiming income averaging where the famer, or their spouse / civil partner, carry on another trade or profession or are a director of a company carrying on a trade or profession, where they can control more than 25% of the ordinary share capital of the company.
Income averaging will of course only apply in respect of the farm profits. This is a welcome amendment that should assist farmers who supplement their farm income with another trade.
Stock eelief was extended for a further three years, to December 31st, 2021. This is a valuable relief and, while its extension is welcome, the lifetime cap discussed later may limit or eliminate the benefit of this extension.
In simplified terms, young trained farmer stamp duty relief is an exemption from stamp duty available to qualified farmers who are under 35 years of age and intend spending at least 50% of their working week farming. This relief has been extended for another three years, until the end of 2021.
This extension is subject to a commencement order as the relief is State aid. I do not believe that the extension to this valuable relief is in doubt at a time when the State wishes to attract young farmers into the trade of farming.
The Finance Bill introduced a new lifetime cap of €70,000 on the amount of State aid that can be granted to a farmer under a combination of young trained farmer stamp duty relief, stock relief and succession farm partnerships credit. This is a new measure driven by an EU directive on State aid. It is a low threshold, which may be exceeded by many when you consider the value of a 6% stamp duty saving and the cumulative benefit of stock relief.
Farm restructuring relief is a capital gains tax (CGT) relief, which can be available when you dispose of one block of farmland and acquire or have acquired another block of farmland. The conditions of this relief can be surprisingly difficult to satisfy, as there must be a reduction in the dispersion of your farm holding. Where you sell part of an outside farm to fund the purchase of land bounding your main farm then the relief may not be available if you continue to own part of the outside farm.
Individuals who avail of CGT relief for farm restructuring are required to provide certain information to enable Revenue calculate the gain that would arise if the relief had not applied.
This information is to be provided at the same time the income tax return is due to be submitted.
For those who avail of the relief between July 1st, 2016 and December 31st, 2018, the information is to be submitted at the same time as the 2018 income tax return, i.e. October-November, 2019. For 2019 and future years, the information is to be provided when the return for the year in which relief is claimed is due.
• Michael Fitzgerald is a chartered tax adviser working with FDC Tax Department Ltd in their Bandon office.