If a disposal takes place, the BPS entitlement is classified as an asset subject to Capital Gains Tax (CGT), just like the SFP entitlements. The base cost for CGT purposes of the BPS entitlement established at the closing date on 29 May 2015 is zero.

This will have no practical effect on those who have held their entitlement since 2005, when the base cost was also zero. For those who bought or inherited SPS entitlements after 15 May 2005, this may result in a capital loss.

Reliefs on disposals are available if certain conditions are met. As BPS entitlements will not be established at the closing date, no disposals of entitlements can take place before that date. Therefore, there will be no CGT implications for those moving to joint herd numbers or entering partnerships between 1 January 2015 and the closing date.

2015 company set up first time for SFPE/BPS

Entitlements can be leased without land as the 1ha to one entitlement rule does not apply to the company being set up in 2015 through a Private Contract Clause (PCC).

However, due to the way PCC was constructed, it only allowed the lease of your own land into the company to claim an allocation right on. To get the allocation right of any rented land, you can do a change of legal entity. If the allocation right has a value then possible capital gains will apply. Final clarification is awaited from Revenue on this issue.

You also have the option of stacking on the owned land, so you don’t have to use change of legal entity on your third party rented land. The more you stack, the higher the value of your entitlements are, and the higher the possible cuts going forward.

Milk quota

In relation to IFA queries on milk quota purchase after 2000 and capital allowances, the Revenue has responded as follows: ‘The ending of a milk quota is a balancing event, meaning that farmers will have to calculate the balancing allowance, if any, due to them in the year in which the quota ends. Capital allowances cannot be claimed after the Milk quota ends.”

Revenue has also confirmed that in the case of milk quota purchased prior to the introduction of capital allowances, ie prior to 1 April 2000, a “negligible value claim” can be made.

Superlevy

In relation to the IFA query on superlevy payments, Revenue has responded as follows: “It is a longstanding Revenue interpretation (IT903106) that the super levy is an expense of the trade of farming. Whether it is deductible in one year or over the three years will depend on the accounts prepared by each farmer. It is likely that most accounts will show the superlevy as an expense in the first year, and then the balance left outstanding as a debt to be repaid in future years. On that basis, the superlevy would be deductible in computing the profits chargeable to tax in the current year of assessment.”