Farmers did not escape cuts in this year’s budget.
The changes affecting farmers include a cut in the VAT credit from 5.2% to 4.8%. This flat rate addition is designed to compensate farmers for VAT they pay on supplies and farm inputs.
The farmer is entitled to a flat-rate addition (at present 5.2%) to the prices at which his or her agricultural produce or agricultural services are supplied to VAT-registered persons and companies, including marts, agricultural co-ops, and meat factories.
A 30-cow farmer with followers would be down €300, assuming total sales of €75,000. A 100-cow farmer, with followers and cattle, would be down €1,000 (on turnover of €250,000).
This change seems at odds with the reality that the higher rate of VAT increased by 2% from 21% to 23% since the VAT credit was last adjusted.
There has been an increase in capital gains tax and capital acquisitions tax (gift/inheritance tax), both have gone up by 3%, and now stand at 33%. This will impact on those with smaller or marginal farms most, particularly where either the farm happened to be let under conacre, and perhaps where the successor has a reasonable amount of off-farm assets. There is a better chance of “agricultural relief”, a relief from inheritance tax, being effective on large farms, and even on “supersize” farms, but it may not apply on small holdings, if the successor owns a significant amount of non-farm assets — such as owing their home outright, or owning an investment property.
There was an initial shock, when the extension to the stamp duty exemption which applies only on transfers to young trained farmers was not clarified in the budget speech, and it was most welcome to subsequently receive the press announcement from Minister Simon Coveney confirming that this sensible policy will extend beyond the original expiry date of Dec 31, 2012. The stamp duty exemption has been in place since 1994, and is a vital measure in encouraging transfers of farms to the next generation.
As we have reported, just 6% of farmers are under 35, while 31% of farmers are over 65, and the stamp duty exemption is one of very few policy initiatives to encourage early transfers.
Meanwhile, the budget included an increase in the minimum amount of PRSI payable from €253 to €500, an increase of €247.
In the volatile environment in which farmers operate, the minimum PRSI of €500 doesn’t seem to make much sense, when one year’s income may be quite good, with a lot of PRSI payable, whereas in another year, where a farmer has made losses, the PRSI will still be at least €500.
The effect of the increase in minimum PRSI is replicated for all but the lowest paid employees. In fact, these changes to the PRSI, as well as the proposed roll out of PRSI and USC to “unearned” income such as rents and dividends, puts “Joe Public” on the same footing as where the self-employed have been for years.
Other changes affecting farmers include the adjustments to the manner in which Farm Assist is calculated, and as a result, there will be a significant limitation on the amount of people who will continue to qualify for Farm Assist, due to changes in the income and children disregards.
On the payments side, the last of the REPS schemes seem to be fully funded, with a further allocation for AOES for 2013.
But dairy discussion group payments will not be renewed, with funding now directed towards the Beef Technology Adaption Programme and the Sheep Technology Adaption Programme. It’s a pity that some sensible, cost-neutral, policy changes were not announced, however there may be some hope that that is rectified when the Finance Bill is published in February.
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