Farm Ireland
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Monday 20 February 2017

stock relief is good option

Aidan O'Boyle

Published 31/05/2011 | 05:00

With the values of livestock having increased significantly over the past 12 months, it is useful to know that there is a tax relief available to farmers operating as sole traders, partnerships or through farming companies in respect of increases in stock values. This relief was due to expire last year but it has been extended until the end of 2012, subject to the signing of a Ministerial Order.

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The relief is calculated as 25pc of the increase in stock values for the accounting period.

It must be claimed in writing on or before the tax return filing date. This is October 31 this year in the case of a 2010 personal tax return and nine months after the year end in the case of a corporation tax return. Stock relief cannot create or increase a loss for tax purposes. Excess capital allowances or unused losses from a prior period may not be carried forward from a period in which stock relief is claimed.

Relief for Young Trained Farmers

Enhanced stock relief of 100pc is available for a period of four years if an individual becomes a 'qualifying farmer', which means an individual who, in the period of January 1, 2007 to December 31, 2012:



  • First qualifies for grant aid under the Scheme of Installation Aid for Young Farmers;


or



  • First becomes chargeable to income tax in respect of farming profits;


and



  • Is under 35 years of age at the start of the tax year;
  • At any time during the tax year is the holder of a certificate issued by Teagasc certifying that the individual has met specific training requirements.


The specified qualifications include those awarded by FETAC, HETAC and other third-level institutions. Other courses that have been certified by Teagasc and the National Qualifications Authority of Ireland as being equivalent to these courses also qualify. Further courses qualify provided that they are supplemented by further agricultural/horticultural studies exceeding 100 hours and farm management courses exceeding 80 hours.

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The 2007 Finance Act amended the list of courses required to satisfy the educational conditions for young trained farmers. However, any person that satisfied the educational requirements in place before March 31, 2008 will continue to satisfy the young trained farmer educational requirements.

In the year of starting a farming trade, there will be no opening stock figure in the accounts. For the purpose of the stock relief computation, the person will be treated as having had an opening stock of such a value as appears to the Revenue to be reasonable and just.

In determining the value of the opening stock of an accounting period the inspector will have regard to all the relevant circumstances, including movements in the period in the costs of individual stock items and changes in the extent of farming during the period.

Provisions are in place to provide stock valuations in situations where it is more difficult to ascertain the increase in stock value in an accounting period. Examples include the following:



  • The accounts are prepared for a period that is not of exactly 12 months duration;
  • A person has acquired or disposed of trading stock otherwise than in the normal conduct of the trade of farming;
  • There is a change in the basis of calculation of the value of the trading stock during the accounting period.


A person is not entitled to stock relief for an accounting period if the accounting period ends by virtue of the person ceasing to:



  • Carry on the trade of farming;
  • Be resident in the State; or
  • Be within the charge to tax in respect of that trade.


Conclusion

This is a potentially very valuable relief in instances where stock values are rising rapidly, particularly where one qualifies as a young trained farmer and full relief is available. There are a number of qualifying conditions to be met and farmers should speak to an appropriate adviser if they believe they may qualify for relief. As there is no clawback of the relief, this represents a permanent saving.

Aidan O'Boyle is the manager at Grant Thornton's taxation division

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