IFA Puts Forward Taxation Measures to Counter Income Volatility and Speed Up Farm Transfer

Addressing the Oireachtas Committee on Agriculture today (Thurs), IFA President Eddie Downey set out the Association’s agri-taxation submission, which identifies a number of new and innovative taxation measures. If implemented, they would tackle two of the major challenges facing Irish agriculture: income volatility and barriers to lifetime farm transfers.

Eddie Downey said, “The agri-taxation review provides an opportunity to ensure the taxation system delivers coherent support for achieving the goals in Food Harvest 2020”.

He said, “We can clearly see the impact of volatility in the tillage sector, for example, which, in 2013, experienced a fall in incomes of 20% (to less than €30,000) due to a price collapse, despite improved yields. Prices in this sector have continued to fall through 2014.”

The proposals to manage income volatility and encourage lifetime transfer are:

• An income-smoothing mechanism that would operate within the income tax system, in addition to income averaging. This would allow a farmer place on deposit a portion of their pre-tax income, in a designated commercial farming account (‘Tax Deposit Account’). This could then be drawn down by the farmer and used for the running of his business when required, and would be taxable in the year it was drawn down.
• A ‘Phased Transfer Partnership’ (PTP). This is a progression model in which there would a defined, phased transfer of the family farm over a set time period. It would require an agreed transfer contract where both parent and child would work together in partnership over the period of the phased and progressive transfer of assets. As an incentive to the farm holder to enter into the contract they would receive tax relief on a portion of their farm income, up to an agreed ceiling.

In addition to these innovative measures, IFA has submitted a comprehensive set of proposals, covering all aspects of farming business.

In respect of income tax, IFA has proposed:

• The introduction of an optional system of increased Capital Allowances. This would provide Capital Allowances of up to 50% over the first two years.
• Extending the 100% Young Trained Farmers’ Stock Relief to all farmers, for a period of 4 years, up to 2020;
• Extension of income averaging to farm profits where the farmer or spouse has an additional source of self-employed income; and
• Introduction of an Earned Income Tax Credit to remove the discrimination in the income tax system between employees and the self-employed.

In the areas of Farm Transfer, Succession and Land Mobility, IFA has proposed:

• Retention and index-linking of the Capital Acquisitions Tax tax-free exemption thresholds, and retention of 90% Agricultural Relief;
• Improvement in the uptake of the land leasing tax exemption scheme through recognition of incorporated farm businesses as qualifying lessees, and removal of the 40 year age limit for qualifying lessors;
• Reintroduction of indexation for Capital Gains Tax and retention of CGT retirement relief.

To encourage greater numbers of Farm Partnerships, there must be an extension of existing tax reliefs for Milk Production Partnerships to all registered farm partnerships and reintroduction of CGT relief in the event of a farm partnership dissolution.