The Finance Bill was published last week.
It is the legal framework to implement the budget announcements, and requires ratification from the Dáil, the Seanad, and finally the President before coming into law.
Usually, the process takes five or six weeks, with last year’s bill passed into law on Christmas Day.
Effectively, some tax measures come into effect on budget night, some come into effect on the passing of the Finance Bill into law (the day the bill is enacted by the President).
Some measures come into effect from January 1, where that is specifically mentioned as the start date in the legislation.
Yet more measures can come into effect at an even later date, if subject to a ministerial order, or where such measures require EU state aid approval.
The Finance Bill has given us the proposed legal text on the various farm tax and other tax measures announced in the budget.
For income averaging, the Finance Bill sets out that some of the current restrictions in relation to income averaging are to be lifted.
Averaging is currently not available for self-employed persons who carry on another off-farm trade or profession, or whose spouse/civil partner caries on another trade or profession, or where either person is a director of a trading company and holding more than 25% of the shares in that company.
The change in the rules for income averaging will be of no benefit to farmers this year, many of whom face relatively high tax bills coming off the bank of a successful 2017.
Income averaging allows eligible farmers to calculate their taxable income as the average of their income in the current year and the previous four years, on a rolling basis, thus smoothing their tax liability over a five-year cycle.
The main disadvantage of averaging still exists, that in years of lower income, the averaged tax liability is higher than it would have been were the farmer outside the income averaging scheme and paying tax on their actual income.
But, at least, a farmer will know with a high degree of certainty what his or her tax liability is likely to be in the coming year.
The provisions dealing with a clawback after an opt-out of averaging can be particularly onerous, and many farmers are slow to commit to averaging for fear of a high future clawback in the event of an opt-out or default out of averaging.
The announcement of the extension of income averaging to farmers with off-farm income is welcome nonetheless, and adds to a number of alterations to income averaging over the past few years designed to make it more accessible and functional for farmers.
Importantly, farmers who have not declared profits for five consecutive years, including young farmers in their first four years of farming, continue to be precluded from access to averaging.
The 25% general stock relief on income tax; the 50% stock relief on income tax for registered farm partnerships; and the 100% stock relief on income tax for certain young trained farmers are all extended to December 31, 2021.
The Finance Bill has also seen the introduction of a cumulative lifetime cap of €70,000 which will apply to the amount of tax relief/credit enjoyed by a farmer under the young trained farmer stamp duty relief, the stock relief for young trained farmers, and the succession farm partnerships tax credit.
In practical terms, this means that young trained farmers can effectively only avail of the stamp duty exemption where the land transferred has a value up to €1,166,666.
For any land transferred in excess of this value, it may be possible to avail of consanguinity relief, albeit that relief is due to expire on December 31, 2020.
There may be further clarity on this measure though Oireachtas questions to ministers over the coming weeks.
Young farmers who expect to receive a gift of land or who are in the process of purchasing land should obtain professional taxation advice in advance of the passing of the Finance Bill.