Taxman's data reveals significant farming trends

Financial advice for farmers

Revenue's 2019 annual report on the farming sector shows Co Cork had the highest average gross income per farmer, and the second highest net income per farmer.

Revenue have published their annual report on the farming sector in Ireland.

The series has been running now for six years and is useful for analysing trends in agriculture.

This Revenue snapshot, along with Central Statistics Office surveys, is hugely important, as the information gleaned from them is based on an entire dataset of all farmers in the country, as opposed to other surveys which extrapolate results based on a much smaller survey group.

The first point to note is that there are over 148,227 income tax returns filed, where farm income has been declared. This differs from the number of single farm payment applications submitted to the Department of Agriculture, which is approximately 123,000 for 2019. This can be reconciled because some farmers may have jointly held herd numbers, meaning one single farm payment application, but perhaps two, three or even more income tax returns declaring each person’s share of profits.

In line with CSO statistics, a huge cohort of over 50,000 farmers are aged over 60, representing 34% of all farmer cases, with a further 27,000 in the over-50 bracket.

Over the next two decades or so, as these farmers age, about half of the farms in the country will be transferred or sold.

We can see from Revenue data that the transition to younger farmers is at a relatively slow pace.

Just 290 cases of succession tax credit were claimed for 2018, suggesting about 145 farmers and their children availed of the scheme, to encourage farm transfers.

Similarly, the number of claims for enhanced young trained farmer stock relief (available in the first four years) is fairly small, at just 420 cases for 2018.

The number of transfers from parent to child which benefited from capital gains tax retirement relief stood at just 322 cases for 2018.

Of course, some farm transfers may otherwise be exempted from capital gains tax, based on the historical value, or if the taxpayer has other losses. But the relatively small number of instances of one of the principal reliefs for farm transfers suggests the number of farms being transferred is comparatively low.

Meanwhile, the total number of beneficiaries who claimed agricultural relief, one of the main reliefs from gift/inheritance tax, stood at 1,413 in 2019.

This means just 1,413 people received agricultural assets (likely to exceed €320,000) either by way of gift or inheritance in 2019.

Some persons might not have been able to claim agricultural relief, or may have claimed business relief, but either way, the statistics show a relatively slow pace of transition.

Importantly, data on stamp duty show more persons claiming blood relative relief than young trained farmer relief, at 1,605 cases and 1,128 cases respectively, pointing to perhaps either an increasing cohort of transfers happening after the age of 35, or an increasing number of persons choosing to let the land rather than to farm it as required under young trained farmer relief.

Data on the leased land exemption shows that the number of taxpayers choosing to avail of this tax relief continues to increase rapidly, from 5,130 cases in 2014, more than doubling to 10,820 cases in 2018.

The number of farmers claiming refunds of VAT (for unregistered farmers) stood at just 17,446 for 2018, and 16,528 for 2019, suggesting either a large cohort of farmers are not making claims, or not many farms are carrying out improvement works.

For my fellow Corkonians, you’ll be glad to know the Rebel County had the highest average gross income per farmer, at €113,052, and had the second highest net income per farmer, at €56,160 per farmer.

Leitrim had the lowest net income per farmer at €8,794 per farmer.

- Kieran Coughlan is a chartered tax adviser based in Belgooly, Co Cork (www.coughlanaccounting.com)