One third of the country’s farmers are set to be hit with changes to how the renting of land is carried out from next month’s budget, according to An Taoiseach Enda Kenny.

Speaking at the National Ploughing Championships in Ratheniska, Co Laois, last week, Kenny said he wants to make changes in the budget to the land rental system in Ireland as he believes it is not “conducive to long-term, productive farming”.

“We need to make it easier to shift land to young farmers who are qualified and competent.

‘‘If a person leases land on an 11-month or conacre basis, there’s little point in investing in that land as the time is so short,” Kenny said.

“Farmers themselves and people who lease land and those who want land leased from them would prefer a longer system with greater clarity, so that if land is leased and investment takes place that it can give a return to the person who leased it,” Kenny added.

Some 43,000 farmers rent in excess of 650,000ha per annum in an 11-month contract, otherwise known as conacre. Recent figures suggest that just over 3,500 farmers are involved in long-term leases of greater than five years.

An Taoiseach suggested that a lease of five years is on the lower side of expectations and that leases in the line of 10 years or longer would be preferable.

Conacre

Macra na Feirme has been particularly in favour of a move away from conacre. In its submission to the agri-taxation review, it described a short-term rental agreement as “the worst use of land for all concerned – the farmer won’t improve the land as they have to exit in 11 months, while the owner will see the land value deteriorate year on year”.

The association’s president Kieran O’Dowd said that “more stable collaboration” is required.

“The tax code should be rebalanced to greater favour leasing over conacre rental agreements as they have a negative effect on farm planning and farm startups. Moving away from conacre is a no-brainer as it is a win-win for the farmer and land owner,” O’Dowd said.

Conacre in the crosshairs in agricultural tax review

Conacre will be the main target in the crosshairs of the agricultural tax review that is due to be revealed in the budget. Minister for Agriculture Simon Coveney and even Taoiseach Enda Kenny have hinted that getting farmers to switch from the 11-month renting system to longer term leasing has proved to be one of the greatest obstacles to land improvement and mobility.

The big question is if the carrot or the stick will be used. The carrot of tax-free income from leases longer than five years has been used in the past, with limited success.

Part of the reason is that many farmers who lease their land on conacre are not in the tax net.

Increasing the amount that is tax-free is an option, but freeing up both limited companies and family members to trigger the tax-free concession for the landowner could be on the cards.

A small stick was introduced in the last budget where landowners whose land is let out on a conacre basis or on lease of less than five years in duration, after they cease actively farming it for 10 years, cannot avail of Retirement Relief from CGT if it is transferred to anyone other than their child.