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Thursday 15 November 2018

Farmers should watch out for a possible sting in the budget's tail

It was a positive budget for farmers but we should reserve judgement until the Finance Bill is published

Finance Minister Paschal Donohoe arrives at Government buildings with Budget 2019. Picture: Gerry Mooney
Finance Minister Paschal Donohoe arrives at Government buildings with Budget 2019. Picture: Gerry Mooney

Martin O'Sullivan

As I listened to Minister Donohoe's budget speech last week, I remarked to myself that farmers were scarcely mentioned.

But on closer examination of the budget documentation on the Department of Finance website, I began to realise that farming had not in fact been forgotten as there are a number of worthwhile specific measures.

These, coupled with measures benefiting the general public, could amount to a real improvement in disposable incomes, particularly for a suckler farmer in a disadvantaged area.

In reality it is the totality of benefits that renders it a 'not so bad' budget for many farmers.

We can all be thankful that virtually all of the budget measures, minuscule as many of them might be, are positive and a welcome departure from the cut and slash budgets of recent times.

That said, the 'sneaky stuff' is generally concealed in the Finance Act so maybe it will not be all positive by the time the changes are enshrined in legislation.

MEASURES SPECIFIC TO FARMING

• New Beef Environment Efficiency Pilot Scheme

This scheme is designed to improve the carbon efficiency of beef production and aims to provide up to €40 per suckler cow in return for various actions including the weighing of calves.

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• Increase in Disadvantaged Area payment

A funding increase of €22.7m would indicate an overall increase in payment of 10pc. It remains to be seen if this will result in an across-the-board increase of 10pc. If so, the increase could be worth up to an additional €340 per year for those in receipt of the maximum payment.

• Increase in forestry funding

A funding increase of €103.5m for improved grant and premium rates.

• Increased funding for TAMS grants

An increase of €70m in funding is allocated.

• Increased funding for Environment & Waste Management Programme

An increase of €70m in funding is allocated.

• Increased funding for Future Growth Loan scheme

This scheme is available to SMEs, including farming, and has been funded to the tune of €300m. Loans under this scheme are provided unsecured.

• Farm Assist Increase

An increase of €5 per week plus an increase of €5.20 per week for each qualifying child under age 12 or €2.20 per week for each child under age 12. For a family of two parents and three children over age 12 this could be worth an additional €20.60 per week.

• Three-year extension to the Stamp Duty Exemption scheme

This exemption applies to young trained farmers under age 35 who are in a position to devote 50pc or more of their normal working hours to farming.

• Three-year extension to the stock relief schemes

This extension applied to the young trained farmer 100pc scheme, the 50pc partnership scheme and the 25pc general scheme.

• Relaxation of the Income Averaging rules

Up until now people with another self-employed trade such as agricultural contracting were not eligible to avail of Income Averaging but this restriction has now been abolished.

GENERAL MEASURES INCLUDING FARMERS

• Extension of low tax bracket

The low tax bracket has been extended from €34,550 to €35,300, which will represent a saving of €150 per annum for those earning more than €35,300.

• Reduction in USC

Any reduction is welcome but this reduction is minuscule. An individual with an income of €37,000 will save €14.38.

• Increased Earned Income Credit

This credit applies to all self-employed people and has been increased by €200.

• Increased Home Carer's Credit

This credit applies to stay-at-home parents caring for one or more dependent people and earning less than €7,200 per annum. The credit has been increased by €300.

• Capital Acquisitions Tax threshold increase

The pre-budget threshold from parent to child was €310,000 and this has now been increased to €320,000.

• Pension increase

The state pension has been increased from €242.30 per week to €248.30, and the qualified adult dependent (over age 66) has gone from €218 to €222.50. Overall this gives a spouse and his/her adult dependent where both are over age 66 a combined annual pension of €24,952 to include the Christmas bonus. If both spouses are eligible for a pension in their own right the combined annual pension is €26,320.

• Self-employed are to become eligible for Jobseekers' Benefit

From October 4, 2019, self- employed persons will be eligible for jobseekers' benefit. This is unlikely to benefit farmers as the availability of Farm Assist is currently there for people with low incomes.

When one takes account of the totality of measures, everyone is a winner to some extent. Some will benefit far less than others, such as a typical single person on the average industrial wage of €37,000, who will be better off to the tune of €14.38.

Contrast that with a not untypical farm family as described in the case study set out at table A where the before-tax increase in their household income is 5pc.

Martin O'Sullivan is the author of the ACA Farmers Handbook. He is a partner in O'Sullivan Malone and Company, accountants and registered auditors; www.som.ie

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