It was encouraging to see the minister once again use his budget day speech to acknowledge the important role played by the farming and agri-food sector in Ireland’s economic recovery.
This is well-deserved recognition for a sector which is responsible for approximately 169,000 jobs across the length and breadth of Ireland, and which has grown to the point where Ireland is now providing food to feed 50 million people globally.
While this is clearly a time of great opportunity for the Irish agricultural sector, with an ever-growing global population presenting exciting new markets to be tapped, there remain continuing pressures on farming incomes together with other sectoral concerns.
In preparing his budget, the minister has listened closely to the representations made by those in the sector.
Farm Transfer Partnerships
With the aim of increasing farm productivity, recent government policy has shown a consistent desire to see farms transfer between generations in a structured and timely fashion.
However, experts in the farming sector have long highlighted the significant challenges preventing this from becoming a reality, not least the fact that many farms are not sufficiently profitable to support two families simultaneously.
Following on from a proposal made by the IFA in its pre-budget submission, last Tuesday’s budget saw the minister announce a new income tax relief for farming partnerships.
The relief is expected to take the form of a tax credit of up to €5,000 per annum for five years. The relief is allocated between the partners in the farming partnership based on their profit-sharing agreement. The partnership can operate for up to ten years, at the end of which period, the farm must be transferred to the younger farmer.
The introduction of this relief is subject to EU state aid approval, but would certainly be welcome news for those seeking a viable opportunity to transition their farms to a new generation.
Extension of a number of existing agri-food tax reliefs to 2018
A number of key reliefs relevant to those involved in farming were set to expire on December 31, 2015. In recognition of their continuing value to the agri-food sector, these reliefs have now been extended for a further three years to December 31, 2018.
The reliefs covered include general stock relief, stock relief for young-trained farmers, and stock relief for registered farm partnerships.
Stock relief is available only to farming trades and is a relief given in respect of increases in the value of farm trading stock.
The minister also announced the extension of stamp duty relief for farm transfers to young-trained farmers under the age of 35 for a further three years to December 31, 2018.
Profits from the occupation of woodlands
To encourage the forestry sector, profits or gains from the occupation of woodland in Ireland, which is managed on a commercial basis and with a view to profit, are exempt from income tax and corporation tax (but not USC and PRSI).
However, the exemption for woodland profits has been subject to the high income earners restriction, which caps tax reliefs so that the minimum effective income tax rate for an individual is 30 per cent.
The budget proposes a new measure to remove profits from the occupation of woodlands from this restriction in recognition of the unique characteristics of forestry, particularly regarding the timing of revenue streams.
Capital Acquisitions Tax
While not solely targeted at the agricultural sector, the increase in the capital acquisitions tax (CAT) Group A tax-free thresholds from €225,000 to €280,000 will be of particular interest to farmers and those with agricultural property.
When taken together with the existing agricultural property relief, this increase should translate to a material reduction in the potential tax liability arising on the transfer of agricultural assets to an individual’s children.
Self-employed tax credit
It has been well noted that self-employed individuals are heavily penalised by the current Irish tax system. This is particularly evident at lower income levels as self-employed people enter the tax net much earlier than their peers in employment. One of the key drivers of this inequality has been the fact that employees are automatically entitled to a tax credit of €1,650.
Steps to address this have finally been taken with the introduction of a similar “earned income” credit for the self-employed and farmers for 2016. This credit is proposed to start at €550 with the minister’s stated aim being to increase this in future budgets, public finances permitting.
Alongside the budget, the minister published an independent review of existing tax supports for the marine sector. This follows last year’s commitment to review the sector, and will hopefully lead to the adoption of concrete measures in future budgets.
The report aims to cover a wide spectrum of industry participants, from those engaged in international shipping to those involved in fishing and seafood processing. The report proposes The proposed tax measures are practical and timely, and should provide a tangible benefit to the Irish agriculture sectora range of actions, including increasing the availability of capital allowances for ports and port-related plant and machinery; amendments to the tonnage tax regime; and the extension of many existing schemes and reliefs (such as CAT agricultural relief) to those in the fisheries and seafood sector.
As always, approval from Europe will be required for interventions in this sector and may dictate the range of options which ultimately prove feasible. Nevertheless, those in the industry will continue to monitor the government’s future ruminations with interest.
Reducing transportation costs
Another benefit for farmers was the commitment to simplify and restructure the motor tax rate system for certain commercial vehicles. From January 1, 2016, the 20 existing commercial rates will be replaced by five new rates, ranging from €92 to €900. There were no changed announced to the motor tax rates for general haulage tractors or other agricultural tractors.
Separately from matters of taxation, budget day also brought news of additional funding to the Department of Agriculture, Food and the Marine. This has been marked for allocation towards, in particular, the Rural Development Programme and a range of agri-environmental schemes.
The increased funding is also expected to benefit the Seafood Development Programme, aimed at driving investment in fisheries and seafood development in the period up to 2020.
In what could have been a quiet budget for the sector, the minister has instead taken on board the advice of those working in the area to craft a package of measures aimed at solidifying the progress made in last year’s budget.
The proposed tax measures are practical and timely, and should provide a tangible benefit to the Irish agriculture sector.
The minister’s announcement of the completion of the independent report into the marine sector is welcome. It is hoped that this will lead to the introduction of specific measures in next year’s budget which will help maximise Ireland’s opportunities in this sector.