Consider your options on tax of CPO monies
Published 14/12/2011 | 06:00
A recent spate of audits by the Revenue was targeted at farmers who received CPO monies in the east and southeast. It threw up worrying results, with 86pc of those audited found to be liable for significant settlements with the Revenue.
So what should you do if you think you are in a similar situation? You have three options:
• The classic: Stick your head in the sand and hope it will go away. Needless to say, this is not recommended.
• The Revenue's favourite: Go in with your hands up and confess all tax sins. This would obviously be the Revenue's favourite option, particularly if you have a chequebook. However, it may not be the best option as you may pay too much if not properly prepared.
• Be prepared: Admittedly, these aren't great options. But there is help at hand and it doesn't have to cost you. Check out the terms of your farm insurance policy to see if a claim can be made for professional fees to deal with a Revenue audit.
The first thing that you need to be clear about is how the compensation figure was arrived at. Many factors are taken into account in agreeing the amount, which covers not just the land itself but also compensation for disturbance, severance and injurious affection. It is not always clear how the various elements of the total figure have been computed, so there can be scope to allocate as best suits the taxpayer.
Most of the compensation is usually subject to CGT rules, with the new CGT rate of 30pc applying to any gain. But just because a compensation payment amounts to, say, €1m doesn't mean that there should be a €300,000 CGT bill. Here's some examples of the reliefs and exemptions that could apply: