Dairy farmer

Frank is milking 70 cows. His wife, Margaret, does not work, so the farm generates the full family income. He has earned an average of €50,000 over the past three years and this will fall to €35,000 in 2016 due to the collapse in milk price. They have two children, one in college and one in secondary school. This farmer will be looking for the new tax break.

If Frank avails of new income averaging step out for 2016 on €35,000 income:

Frank has a liability of €4,768 by availing of the opt-out and the deferred amount of €5,865 is paid over the next four years.

Drystock farmer

Mary is a drystock farmer with income of €25,000. Her husband, Edward is a teacher earning €50,000. They have two children under the age of 10.

Hill sheep farmer

Billy is a small hill sheep farmer and is married to Bernadette. They have four children aged between two and fourteen. Bernadette works off farm part-time and earns €8,000 p.a. Billy currently is a recipient of the Farm Assist Scheme.

Budget 2017 change – Farm Assist The cuts introduced in 2012 and 2013 Budget have been fully reversed i.e. child and income disregards have been reintroduced. The weekly payment will be increased by €5 per week for Billy and €3.30 for his wife.

This will have an impact on the farm in a positive manner.

Graduate returning home

Johnny is 22 and a recent ag college graduate. He is returning home to take over the farm from his uncle. The farm is 100 acres and worth €700,000. He looks to avail of the favourite nephew tax break. In addition, he will also look at the new low interest rate loan.

The new interest rate loan will give Johnny access to funds at a rate lower than 3%. On capital taxes/transfer, they would need to consider the following: Will Johnny be able to meet the working requirement on the farm in order to avail of favoured nephew relief?

In order to avail of this, he must have worked for 15 hours per week for five years prior to the transfer. This is something Johnny would need to be certain of. Johnny can start working on the farm now and in a number of years avail of the relief. By availing of the relief, he will be treated in the same way as a child, thus availing of the higher threshold. This threshold increased from €280,000 to €310,000 in the budget.

By availing of favoured nephew relief and agricultural relief, Johnny will be able to have no capital tax for himself. However, his uncle would need to ensure he meets the relevant conditions. In any event the favoured nephew only applies to agricultural assets passing. If there are other assets passing Johnny will still be able to avail of the Class B threshold which saw an increase in same by 8% from €30,150 to €32,500.

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Full coverage: Budget 2017