Nearly 6,500 farmers who leased out 100% of their land and entitlements in 2013 have until 15 May to transfer their entitlements to avoid losing them completely.

The ‘forced transfer’ is opening up owners to capital gains tax of 33% of the sale value. Where entitlements are gifted for below market value, a capital acquisition tax of 33% could also be levied. VAT charges of 23% would have to be charged if the total sale values breaches €37,500. Some estimates put the potential tax bill at up to €30m. Active farmers who are forced to buy the leased entitlements are also facing cashflow pressures. Approval to additional bank borrowing to finance the sales would also be tight as the deadline approaches.

The IFA has called on Minister Coveney to directly intervene with the Department of Finance to get a taxation derogation to ensure farmers are not penalised over shortcomings in the regulation.

The Department of Agriculture has met with Finance providing information regarding the transfer of certain leased entitlements. It has sought clarification regarding the tax implications for farmers. Department sources said that there will not be a decision made before May deadline. This leaves farmers who are forced to sell and buy in limbo about the final tax implications.

Analysis of data for the 2013 scheme year indicates that 6,471 distinct herd-owners leased out €40m of entitlements and fall into the category of not having an ‘allocation right’ in 2013. This figure includes a number who may have leased a portion of their entitlements but did not draw down payment on the entitlements they retained. Some 1,968 cases relate to leases between family members and there are 418 cases which involve leases to a company, the total value of the entitlements being €12m. The Department is writing to all of those affected this week to explain the circumstances involved and to outline their options to remedy the situation.

The main option is to sell entitlements, ideally to the originally leaser who holds the land. But some land owners will want to enter an agreement that will see their entitlements given back at the end of the lease, although this is proving complex due to the tax implications.

For companies, the Department is advising anyone going into a company this year to transfer entitlements via change of legal entity. Any existing leases to companies should also be broken and now submitted via change of legal entity.

Get to one of the five Irish Farmers Journal CAP briefings. The first one is at the Mullingar Park Hotel on 18 March at 8pm sharp. See ad on page 18 for other dates.