Farmers who received a patronage shares tax letter from Revenue should engage with Revenue without delay, Finance Minister Michael Noonan has advised.
Responding in the Dáil to Kerry TDs Brendan Griffin (Fine Gael) and Michael Healy-Rae (Independent), Mr Noonan said early engagement with Revenue, where the share value received has been included in the accounts for the years in question, will mean an early conclusion of Revenue’s enquiries.
Early engagement with Revenue, where the share value received was not included in the accounts, will facilitate discussion with Revenue, with a view to agreeing a mutually satisfactory arrangement, including if necessary, a phased payment arrangement to deal with any tax liability involved.
“I am advised by Revenue that there have been extensive contacts with them in regard to this matter generally, and they are and will be responding very quickly to those contacts, to assist farmers to bring matters to an early conclusion,” said the minister.
He confirmed that Revenue says patronage shares received by milk suppliers as a consequence of and in proportion to the quantity of milk supplied get the same tax treatment as employees liable to income tax on share awards linked to their work; it is treated as taxable employment income.
“Where the number of shares is based on and dependent on the level of business between the members and the co-op or nominated purchaser, and where the co-op does not receive the market price for the shares issued, then the profit accruing, the difference between the market value of the shares issued and the price paid for these shares, to the member is a trading receipt of the member’s farming income.
“This is no different to the general tax treatment that applies to other forms of share based remuneration.”
He said the matter at issue is the initial value of the shares received by farmers as a result of their trading relationship with the co-op.
Separately, if an individual sells a share that grew in value after it was acquired, Capital Gains Tax would apply, subject to the availability of any exemption, on the increase in value between it being acquired and being sold.
“I am further informed by Revenue that the letters which issued to certain farmers were invitations to engage with Revenue as regards their tax position for the years 2011 to 2013.
“The letters in question are in the first instance enquiries with the farmers concerned as to whether the value of the shares received has been included in the accounts for the years in question. Farmers who did include the share value in their accounts will not have any additional income tax liability in relation to the specific matter raised.”
n Yesterday’s joint Oireachtas committee on finance, public expenditure and reform, and the Taoiseach’s office discussed taxation matters relating to Kerry Co-Op shareholdings.
Committee chairman John McGuinness TD said: “Hundreds of Kerry Co-op members have received Revenue letters with tax bills ranging from €5,000 to €50,000. Farmers feel that they have been blindsided by these letters, and the Finance Committee wishes to discuss the issue in Kerry Co-op, as well as the possible implications for other co-ops that operate patronage share schemes.”
See Kieran Coughlan’s finance advice column.
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