Incomes have really come under pressure on livestock farms this year.

Increased bought-in feed costs has been the main issue, but it has become compounded by reduced milk sales and prices or beef prices.

On dairy farms, there may be more bad news. Head of tax with ifac Declan McEvoy said a large tax bill has accumulated on many of these farms for 2017 because it was a very good year for milk price.

This 2017 tax payment is due by 31 October for paper filers or 14 November for people who pay online using Revenue’s online service (ROS).

“A lot of dairy farmers will have a big balance to pay for 2017 because average milk prices were approximately 37c/l in that year,” said Declan.

He warned that the worst thing farmers could do is bury their head in the sand and ignore the situation.

Declan gave the simple example of a dairy farmer with 80 cows whose income could be back by €20,000 in 2018 due to lower milk sales and prices.

Farmers should gather the paperwork required now so their accountant can get working on the accounts as soon as possible

This figure does not take into account the extra fodder costs that could have also accumulated on the farm this year.

However, the balance for a high tax bill based on high 2017 profits still has to be paid in a few weeks.

Beef and sheep farms will also be affected.

“They usually have a more consistent tax bill year on year, but with feed costs higher this year, even a small tax bill could be an unwanted burden,” Declan explained.

What to do

The sooner farmers act, the better chance they have of preventing any major negative consequence. Early intervention gives farmers time to come up with a plan of action with their accountant, according to Declan.

“Farmers should gather the paperwork required now so their accountant can get working on the accounts as soon as possible. Accountants will need 2017 farm bank statements, cheque stubs, sales dockets, purchase invoices, stock numbers, etc,” he said.

When the accountant has all the information, he can calculate what the profit and tax bill will be. If the bill is very high, the option is available to use income averaging, which will base the tax bill on the average profit of the business over a number of years. The pluses and minuses of this option should be teased out with your accountant before you go with it, Declan warned.

If there are no funds available to pay the tax bill, Declan said farmers should discuss this with their bank.

“Many banks have options for farmers to take out a loan to cover the bill so that repayments can be made over the next 10 to 12 months,” he explained. If the banks are unwilling to help, Declan suggested that farmers could also contact Revenue directly.

“Early communication is key, they might come to some agreement to structure payments over a protracted period.”

Long term, farmers with consecutive high tax bills should investigate changing the business structure to be more tax-efficient.