Thousands of farmers to get €7k tax break
More than 6,000 farmers are getting a tax break that could be worth close to €7,000 each.
Finance Minister Michael Noonan has announced an exemption from capital gains tax for farmers who are being forced to sell off their entitlements to EU grants because of changes to the Common Agricultural Policy (CAP).
It will apply to around 6,400 inactive farmers who had been leasing out their land but who will now be forced to sell their entitlement rights to EU single farm payments within two weeks or lose their entire value.
Farmers currently get around €300 per hectare, per year from the EU, adding up to an average single farm payment (SFP) of €9,000 per farm in Ireland – but these grant entitlements can be sold to other farmers.
There has been a "massive" trade in these payment entitlements in the last year and they are typically selling for around 2.3 times their annual value, which would work out at €19,800 on the average farm, said John McGee of specialist agri-entitlements trading company HMG.
As capital gains tax is levied at 33pc, the value of this exemption to the typical farmer could be between €6,000 and €7,000, although there will be huge variation, he said.
Mr Noonan said that farmers who lease out 100pc of their land and entitlements would not have been able to prepare for this change to the CAP, as they had already entered into binding lease agreements.
"They are therefore caught between either having to sell their farm payment entitlements or losing them under the new CAP, neither being an option these farmers would otherwise have taken," he said.
The tax break will apply to relevant farmers who had been advised by the Department of Agriculture to transfer their entitlements to active farmers by May 15, 2014.
Farm organisations all welcomed the tax exemption.
Irish Creamery and Milk Suppliers' Association (ICMSA) president John Comer said it was a reasonable solution to an anomaly thrown up by CAP reform and that the Government had "demonstrated a fairness which deserved to be acknowledged".
The Irish Farmers' Association president Eddie Downey said it had identified the tax problem faced by more than 6,000 landowners.
Agriculture Minister Simon Coveney also welcomed the decision which had been the subject of detailed discussions between the two departments.
"It will put an end to uncertainty facing those farmers who would have been adversely affected," he said.
The CAP changes are part of a bid to ensure that future EU payments are targeted at active farmers.