IFA plan aims to tackle barriers facing farmers
The key objectives for IFA are maintaining tax reliefs; securing new tax incentives; examining how the taxation system can better accommodate the extreme volatility in farm incomes; and exploring how tax returns can be simplified.
IFA has proposed measures that would tackle two challenges — growing income volatility and barriers to lifetime farm transfers.
The first is 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, a tax deposit account.
This could then be drawn down by the farmer and used for the running of his/her business when required and would be taxable in the year drawn down. It would also include a banking offset facility for the calculation of bank interest payable.
Secondly, a ‘phased transfer partnership’ is a progression model in which there would be 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 over the period of the phased and progressive transfer of assets. As an incentive to the farm holder, they would receive tax relief on part of their income.
IFA would also like to see the introduction of a system of increased capital allowances of up to 50% over the first two years. The 100% Young Trained Farmers’ stock relief to all farmers should be extended to four years, up to 2020; and an earned income tax credit should be introduced to remove discrimination in the income tax system between employees and the self-employed.
Driving farm transfer, succession, and land mobility has to be a key element of this review. The 90% agriculture relief must be retained, and the CAT tax-free exemption thresholds index-linked.
On the land-leasing tax exemption scheme, we want an improvement in uptake through recognition of incorporated farm businesses as qualifying lessees, and the removal of age limit for qualifying lessors.
For capital gains tax, our submission argues for the reintroduction of indexation, retention of CGT retirement relief, with amendment of thresholds for disposals other than to one’s child to encourage greater lifetime transfers and disposals.
On stamp duty, we want to see the retention of young trained farmers and consanguinity reliefs.
An exemption from or other solution for the potential CGT and Vat liability arising from forced disposal of entitlements for farmers who had leased out all of land and entitlements in 2013 also needs to be examined.
There is a case for extending tax reliefs for milk production partnerships to all farm partnerships as well as the reintroduction of CGT relief in the event of a farm partnership dissolution. Compulsory purchase of supply licenses (co-op shares) to be treated as a qualifying capital expenditure, with expenditure written off over seven years; the introduction of a tax-relieved loan scheme open to farmers and non-farmers who wish to invest in the dairy industry; retention of the existing pay and file deadline for self-assessed tax returns; and the extension of a simplified system of farm income assessment for farmers with a non-complex farming system.
