Farmers are being advised to consult their accountants about the tax implications of buying and selling entitlements as the annual trading season gets under way.

More than €60m worth of Basic Payment Scheme (BPS) entitlements were transferred, according to the Department of Agriculture.

Some 220,000 entitlements with a total value of €44.5m were sold in 2016, while 98,000 entitlements worth €20.5m were leased.

Entitlement trading is expected to ramp up this year after clawback on the sale of entitlements was cut from 50% to 20%. Clawback is only applied to the sale of entitlements without land.

The sale of entitlements is subject to capital gains tax, which, along with the clawback, could reduce the overall income from the sale.

Under the Basic Payment Scheme, 100% of farmers’ entitlements must be used at least once every two years and if a farmer did not activate his entitlements in 2016, they should do so this year or face losing them to the National Reserve.

Leasing v selling

The appetite for leasing entitlements is still outweighing that for selling, according to auctioneer Sean Doyle in Maynooth, Co Kildare.

“They all want high-value entitlements,” said Doyle, quoting a multiple of 70% for a one-year lease on entitlements worth €350 to €450 and up to 73% on those over €450. Bidding on entitlements of €1,600 (€1,100 plus greening) has reached 75% and is expected to go higher.

Cork auctioneer Liam Mullins quoted a multiple of 70% up to 75% for leases on €400 or higher entitlements.

Those of €250 to €300 are in demand at around 65%, falling to between 50% and 55% for €100 entitlements, he added.

Both auctioneers advised farmers to seek advice from their accountants when deciding whether to lease or sell entitlements.