BUDGET 2016: Farm transfer tax break welcomed

A tax break to help families transfer their farms to the next generation has been broadly welcomed across the industry.

Finance Minister Michael Noonan said the proposal, which is subject to state aid approval, would provide increased certainty for people looking to transfer their family farm to the next generation of farmers.

The measure will allow two people, for example a father and son/daughter, to enter into a profit-sharing agreement which makes provision for the transfer of the farm to the younger farmer at the end of a specified period, not exceeding 10 years.

To support the transfer, a tax credit of up to €5,000 per year for five years will be allocated to the partnership and split according to the profit-sharing agreement.

The tax-free threshold, which broadly applies to transfers between parents and their children, is being increased from €225,000 to €280,000.

Farming groups also welcomed the introduction of an income tax credit of €550 for farmers and the self-employed to help address the disparity between self-employed and PAYE workers.

The president of the Irish Farmers’ Association (IFA), Eddie Downey, welcomed the progress on farm taxation and said that the income tax credit of €550 was “long overdue”.

Mr Downey also welcomed the decision to increase the tax-free threshold stating that the move more accurately reflected the value of assets. However, he warned that “much more needs to be done in future budgets”.

The president of the Irish Creamery Milk Suppliers Association (ICMSA), John Comer, described the €550 income tax credit as the most significant development in the budget for farmers.

“This is a historic first step in the process of removing the blatant discrimination against self-employed people that has existed for decades and it is essential that this is increased to the same level of the PAYE tax credit in future budgets as Minister Noonan seemed to indicate,” he said.

Mr Comer welcomed the farm succession proposal but expressed concern regarding “the possible over-complexity of the scheme”.

The ICMSA president said the only regret from a farming perspective was “the absence of any measure in relation to addressing the kind of destructive farm income volatility that was wreaking such havoc in the sector currently”.

The president of the Irish Cattle and Sheep Farmers’ Association (ICSA), Patrick Kent, welcomed the income tax credit but also took issue with the lack of measures to ensure that taxation was not unfair due to extremes of income volatility in farming.

“We are pleased to see the reduction in the USC and the introduction of an earned income tax credit of €550 which is the first step in ending a very unfair treatment of self-employed people who do not have a PAYE tax credit.

"ICSA has lobbied for several years to get the same tax credit treatment for farmers and self-employed as apply to employees,” he said.

Mr Kent welcomed the increase in the tax threshold from €225,000 to €280,000 and expressed the view that more increases in the threshold should be considered in line with increasing asset values.

“At the current rate, certain farm families were getting hit with a very onerous tax on transfer of the farm from one generation to the next, notwithstanding the availability of agricultural relief,” he said.

Macra na Feirme national president, Seán Finan welcomed the income tax credit of €5000 per annum for five years for those farming in a partnership who agree to transfer the farm within 10 years.

“This tax credit will encourage and promote progression planning on the farm. This makes the model of farm partnership more attractive from a tax efficient position,” he said.