11 December 2006

7 minute read

Europe

The Minister said “farmers and the wider rural community will benefit significantly from the increases in the personal tax credits and tax bands, the reduction in the income tax rate, as well as the generous increases in social welfare payments”. The Minister also said “the generous package of farm specific measures, includes significant new initiatives on biofuels and tax adjustments aimed at improving structural changes and meeting the competitive challenges ahead. The package will contribute overall to a more competitive and better structured farming sector and reflects the Government's goals as set out in the Agri-vision 2015 Action Plan”. The package aimed at the farming sector is worth €14 million annually in income tax and capital tax provisions, €16 million annually in the VAT rebate and over €15 million over three years in support of our biofuel industry. The measures announced today include:

1. An additional provision of €6 million in the period 2007-2009 has been made available to top-up the existing EU Energy Crop Premium. This will allow the payment of an €80 per hectare top-up to the existing EU energy crops premium bringing the overall premium to €125 per hectare. The €80 additional payment will apply for three years and will be subject to a maximum ceiling per producer of 94 hectares over the three years. The Minister pointed out that the EU Energy Crops Premium of €45 per hectare is due to be reviewed in 2008 and the top-up payment, which will require EU approval, is intended as an additional incentive to kick-start the production in Ireland of crops for Bio fuel. It is also designed to ensure that the supply of indigenous feedstock links in with demand arising from the recently announced Excise Relief Scheme.

2. A Bio-energy Establishment Scheme is also being established for a limited period to grant aid the planting of willow and miscanthus. €8 million is being allocated to support establishment costs over the period 2007-2009. €1.2 million is also being provided for a special scheme to grant aid biomass harvesting machinery, such as harvesters and chippers for processing of forest biomass. The Minister said 1. “these measure will provide farmers with new opportunities to explore alternative land use possibilities and will encourage production of indigenous feedstock in response to the increased demand arising from the excise relief measures announced recently”. Combined these measures are worth €15.2m.


3. Rental Income Tax Exemption for Leasing of Farmland: 1. Budget 2007 has introduced a third threshold for the rental income exemption for land leased long-term. The existing thresholds are €12,000 for leases of 5 to 7 years and €15,000 for leases of 7 years of more. The new threshold of €20,000 for leases of 10 years is being introduced, subject to compliance with relevant EU rules.

The Minister said “the new threshold will enable longer term farm planning and encourage the productive use of farmland”. This measures is worth a €1 in a full year.

4. The stamp duty exemption for land swaps is being extended to cases where one farmer is consolidating, subject to EU approval as regards State Aids. The measure will help farmers improve the viability of the holding by reducing the cost of purchasing farm land. This measure is worth €0.6 million in a full year.

5. Both the existing 25% general stock relief for farmers and the 100% rate for young trained farmers will be continued for a further two years until 31 December 2008, subject to compliance with relevant EU rules. The extension of stock relief will help farmers who are increasing stock levels. These measures are worth €2 million in a full year.

6. The flat rate VAT refund for unregistered farmers is being increased from 4.8% to 5.2%. This measure is estimated to worth €16 million in a full year.

7. The Capital Gains Tax (CGT) Retirement Relief threshold for land disposed of to third parties is being increased from €500,000 to €750,000. This relief allows farmers aged 55 or over to obtain capital gains tax retirement relief on sales or disposal of farms. In order to obtain this relief the beneficiary must have owned and used the land for the 10 year period immediately prior to disposal. From 1 January 2007 full retirement relief will apply to disposals which do not exceed €750,000. Marginal relief can be applied to disposals above the thresholds.

8. The 10 year rule for CGT retirement relief is being modified to cater for farmers who have their land leased out and who subsequently dispose of the land to the person leasing the land. This new provision allows the minimum 10-year period of asset ownership and usage for CGT Retirement relief to be deemed to commence in the period up to the initial letting of the land, provided the land is eventually disposed of to the person leasing the land and the land had been leased for less than 5 years.

"This measure will encourage the early transfer of land by enabling farmers to lease their land prior to disposal. It will be particularly helpful in family situations where there may be an initial preference to lease rather than transfer land", the Minister said.

9. The Minister also welcomed the modification to the 80% asset test for Capital Acquisitions Tax - Agricultural Relief. The Minister said “the adjustment to the asset test to exclude borrowing on an on-farm principle private residences is particularly relevant given the current value of houses”. The Minister also said “transferees still having difficulty with the asset test can apply for business relief”.

10. The capital allowance for the purchase of milk quota is also being extended to incorporate the new milk quota trading scheme. This allows for the capital cost of milk quota purchased under the new trading scheme to be written-off over a seven year period.

11. In line with a commitment given in Towards 2016 and a recommendation in the Report of the Agricultural and Training Forum, the minimum eligibility requirement for stamp duty relief for young trained farmers, will be changed to the “Advanced Certificate in Agriculture”. This will come into effect from 31 March 2008, subject to appropriate transitional arrangements.

12. The world economy represents an extremely competitive environment for Irish producers, no more so than for the export depended agri-food sector. The need for continued focus on innovation and competitiveness in the agri-food industry will be assisted through:

A renewed and enhanced Business Expansion Scheme. The company ceiling is being raised to from €1 million to €2 million. While the individual investor ceiling is being increased to €150,000.
The requirement to pay preliminary tax in the first years of business is being removed for small firms.
R&D tax credits are being extended

13. The general tax provisions in the Budget 2007 include an increase in personal tax credits from €1,630 to €1,760 for a single person and from €3,260 to €3,520 for a married couple. The tax bands have also been increased from €32,000 to €34,000 for single persons and from €41,000 to €43,000 for a married couple with one income and from €64,000 to €68,000 for a double income couple. These measures will ensure that 38% of earners are outside the tax net. The top rate of tax is also being reduced from 42% to 41% and this will reduce the marginal rate of tax for those paying tax at the higher rate.

14. The Minister also has a special welcome for the social welfare package of €1.4 billion, the largest in the history of the state. The €20 per week increase in social welfare rates will directly benefit the 7,500 farm families that are receiving Farm Assist payments. The personal rate will increase from €165.80 to €185.80

Rural families will also benefit for the improved situation for carers. A half rate carers allowance will be paid to recipients of other social welfare payments

15. Arrangements are in place to secure Oireachtas approval for Regulations to fix the rates of disease levy from 1 January 2007 to:

0.06 cent per gallon of milk for processing and
€1.27 per animal slaughtered or exported live.

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