Farmers’ partners who assist in the farming business will have the opportunity to make Pay Related Social Insurance (PRSI) contributions in their own right due to new legislation.

Prior to this, spouses of self-employed farmers who assisted in the farm work, but who were not operating a partnership structure, did not qualify to make PRSI contributions. The extension, which comes into effect for this tax year, will potentially benefit thousands of farm families.

In the past, a farmer’s spouse had to prove they were farming in partnership to make PRSI contributions. If they were working at home, the only other option to boost the important average contribution was to qualify for the homemaker’s scheme. This allowed the years they missed paying PRSI contributions to be excluded when working out the average for pension purposes.

To avail of the PRSI extension when the couple submit tax returns, they must allocate at least €5,000 of income directly to the partner. For example, where the farm made €15,000, the husband would submit €10,000 as his farming income and his wife would submit a farm income of €5,000, the minimum for PRSI contributions.

This would allow the spouse to pay the minimum flat rate contribution of €500 a year to establish a PRSI record in their own right for the contributory pension.

The new changes make it less onerous for spouses. They also benefit families paying tax at the lower rate, where it was often not worthwhile to split the income or employ their spouse for tax purposes.

However, the exclusion from PRSI contribution eligibility where a spouse is employed directly by their partner who is self-employed remains.

Exclusion

This exclusion is across the board and not just aimed at farmers. In a number of cases where farmers have employed their spouse for a wage and actually made PRSI contributions, the payments were returned when the issue was identified.

IFA Farm Business chairman, Tom Doyle has said that the recent extension of PRSI eligibility to partners of self-employed, such as farmers, who assist in the business, is a positive move.

He said: “IFA has always argued that that access to the social insurance contributory system should be open to all. Where possible, individuals should be entitled to make PRSI contributions which would qualify them for their own individual future benefits, such as the contributory pension”.

The change will be very relevant for individuals who, between now and their turning 66, can make sufficient contributions to bring them up to a minimum of 10 years of contributions, thereby qualifying for a contributory pension.

“It is critical that the rules for participation are straightforward and accessible for those to whom this extension applies,” said Tom.

“IFA will continue to pursue the continued exclusion of spouses of self-employed farmers who are employed in the PAYE system on the farm. This is unfairly excluding a category of individuals from the social insurance system,” Tom said.

* Full details on the implications of the change in Irish Country Living next week