BY TOM O’FARRELL
BECAUSE every farmer is different, there’s no ‘catch all’ solution for saving on tax. However, there’s a long list of tax-saving tips that can reduce taxable income. Farmers should use every available tip because over-looked tax deductions are wasted opportunities. At Ifac we have compiled a list of the 20 best tax deductions and tips for 2019.
STAMP DUTY AND LAND
Stamp duty is a tax charged on the transfer of property. In general the only factor affecting the amount of stamp duty charged is the value of the property/land. The transfer of livestock, machinery and basic payment entitlements are not subject to stamp duty. The rate of stamp duty applicable to residential property is 1% on the first €1m, and 2% on the excess over €1m. Stamp duty on non-residential property is 6%.
- Blood relative relief: Stamp duty relief has been enhanced so that any transfer of farm assets between blood relatives is subject to 1% stamp duty instead of the new 6%. Age restrictions on this relief have been removed. Other conditions still remain and should be reviewed before any transfers takes place.
- Young trained farmer relief: This exemption from stamp duty is to encourage the transfer of farm-land to a new generation of farmers with relevant qualifications. The transfer may be by way of a gift or sale.
It applies where the young trained farmer is under 35 at date of the transfer. Young trained farmers must have the relevant agricultural qualifications or must acquire the qualifications within four years from the date of execution of the transfer instrument. The young trained farmer must spend 50% of their time farming the land to qualify.
The exemption is extended to 31 December 2021 but with onerous conditions from 1 January 2019 including the relief is aggregated with young trained farmers stock relief and in total the maximum relief is limited to €70000. In addition, it is limited to a start-up / transfer and a business plan must be submitted.
VALUE-ADDED TAX (VAT)
Farmers and farming companies do not have to register for VAT, irrespective of turnover. Farmers are entitled to apply a flat-rate addition of VAT (5.4%) to their prices when supplying agricultural produce or services to VAT registered customers. Flat-rate farmers are also entitled to reclaim VAT on certain capital expenditure.
- Capital expenditure VAT refund: Farmers who are not registered for VAT can get a refund on the VAT element of any invoices relating to capital expenditure, for example land improvement, yards, fencing, drainage or buildings and fixed equipment, such as milking parlours, scrapers, bulk tanks, etc (repairs are not covered). You can claim VAT back on items purchased in the last four years.
Capital Gains Tax
If a farmer disposes of certain assets such as land, buildings, quotas, shares or entitlements, he or she may be liable to capital gains tax. The farmer must file a return for any 2018 gains or losses by the return filling date in 2019.
For more, read this week’s Connacht Tribune.
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