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Kerry Co-op has advised farmers that their best course of action in the ongoing patronage shares issue is to lodge an appeal with the Tax Appeals Commission.
Kerry’s tax advisor Padraig Cronin and secretary Brian Durran met with more than 100 accountants and tax advisers representing farmer shareholders in Tralee last night, to update them on the latest progress regarding patronage shares.
“Ultimately, it is a decision for each individual farmer, but the consensus among all the tax practitioners at the meeting was that they would be advising their clients to lodge an appeal with the Tax Appeals Commission,” a spokesman for Kerry told the Irish Farmers Journal.
The Revenue Commissioners are expected to issue updated Notice of Assessments to Kerry shareholders in the coming weeks. It will be up to each individual farmer to lodge a formal appeal against Revenue’s claim that patronage shares held by the farmer are subject to income tax.
It is Kerry’s position that farmers had been paid for their milk supplied, and that patronage shares were not related to the value of milk supplied or the milk price paid to farmers.
Killarney-based accountant Seán O’Rourke was one of the 100 tax advisers who attended the meeting.
They fully believe they can fight it
“It was a positive meeting from my point of view, because they fully believe they can fight it,” O’Rourke told the Irish Farmers Journal. “All Kerry co-op can do is assist. It certainly will have to be a farmer that will come forward willing to take a test case and let the courts decide.”
He pointed out that there would be a lot of technicalities involved in making an appeal.
“There’s a Revenue code of practice on the unprompted voluntary disclosure system and the appeals process, each have strict timelines and correct wording on letters is vital. A mistake here could mean the loss of lower interest and penalties, should the test case be lost. Farmers need to take care in how they respond to Revenue,” O’Rourke said.
What is clear, however, is that the consequences of this have far-reaching implications. If a case found that Revenue is correct in valuing the shares at €95, rather than their par value, then it would impact not only on the tax side, but also on social welfare payments such as farm assist, as well as gift and inheritance tax.
O’Rourke said that Kerry’s own tax advisor, Padraig Cronin, told the meeting that the only ‘stake in the ground’ was the Bord Bainne case, which determined that shares are valued at their lower par value.
Co-op ethos challenged
“The farmers were paid for their milk at market price. The issuing of patronage shares is at the heart of the co-op ethos. They feel that is being challenged,” O’Rourke said. “By issuing shares to the farmers trading more, you are re-organising votes, increasing the voting power of the more progressive farmers that will drive the co-op forward.”
It has been 11 days since some 400 of 3,500 farmers received letters from Revenue outlining a tax liability on patronage shares relating to the years 2011, 2012 and 2013.
Updated, formal notices of assessments are now expected from Revenue, detailing to farmers how much tax they owe on the contentious shares.
Only 1% to 3% of Kerry co-op shares are actually traded in any given year, so determining a value based on this is unrealistic
“The Kerry secretary, Brian Durran, released a statistic at the meeting showing that only 1% to 3% of Kerry co-op shares are actually traded in any given year, so determining a value based on this is unrealistic,” said accountant O’Rourke. “He also pointed out that under the rules of the Co-op, Kerry technically could redeem all patronage shares at par value, which further indicates that Revenue’s valuation of the shares is inflated.”
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