Tax reliefs make land leasing a logical option
Renting land is a cost-effective approach for dairy expansion
Since the abolition of milk quotas - which happened to coincide with a 50pc increase in the tax exemption on rental income from leased land - interest in leasing land has heightened considerably. This is most apparent in areas best suited to dairy production.
Despite the current depressed milk price, farmers are still willing to pay attractive rents for access to additional land on a medium to long term basis.
These farmers know that prices for dairy commodities are cyclical and, as sure as night follows day, prices will recover. When the upturn happens they want to land on the ground running. The improvements in the tax treatment of land lease income as announced in the October 2014 budget followed recommendations from the Government's Agri-Tax Review Group.
This suggests that Government policy is four square behind providing tax incentives to accelerate land mobility and land owners have the security of knowing that the tax relief will remain in place for many years to come. Allied to the improved Income Tax exemption thresholds, the period for which a farmer can lease his/her lands without damaging their entitlement to Capital Gains Tax Retirement Relief was extended from 15 to 25 years. All in all, land leasing is very much in favour with the Department of Finance.
Tax relief is available for various lengths of lease for an individual landowner. A spouse or civil partner is also entitled to the relief so if the land happens to be in joint names or if the spouse/civil partner has land to lease separately, well then both parties are entitled to the relief.
Where the annual rent exceeds the allowable limit there may be a case for transferring the lands into joint names. It should be noted that the relief refers to Income Tax only and not PRSI or Universal Social Charge so the rent has to be declared on your annual tax return.