Kerry co-op has requested that the Revenue Commissioners allow a test case be presented to the courts to establish whether shareholders who bought shares through the preference scheme operated until 2013 have incurred an income tax liability or not.

The request was contained in a letter drafted Friday at an emergency board meeting of Kerry co-op, and hand-delivered to the revenue office in Tralee this afternoon. If Revenue agrees to the proposal, the cases of the 400 farmers contacted by letter regarding this issue would effectively be frozen until the case was heard and concluded.

There is a neat symmetry to Friday's events, as the Kerry co-op visit to the Revenue offices in the county mirrored a visit from Anne Dullea, the Kerry district principal officer for the Revenue Commissioners, to the offices of Kerry last Friday, to inform company secretary Brian Durran of the letters and their contents.

The initial shock and panic has evolved into rejection among farmers that Revenue is correct.

Among the issues being raised are:

1 Revenue claims the shares were, in a sense, payment for milk, and thus taxable as income. Farmers say that the shares come from the co-op, which does not have any role in milk processing or payment for milk.

2 Revenue values the shares at their “grey market” price, of up to €95 rather than the face price of €1.25. Farmers point out that this income is only realisable if the shares are sold, which runs directly counter to the intent of the preference share scheme, which was to maintain supplier involvement in the co-op through share ownership.

3 Revenue is not applying this rule going forward, but rather applying it as far back as they are legally allowed – to 2011. Farmers point out that at no point in the past were they made aware of any potential income tax liability from preference shares. Prior knowledge, they argue, would have changed behaviour. A Revenue note on Kerry co-op shares from October 2015 only referred to the CGT or CAT liability of co-op shares, and offered assistance in determining the proper value of shares.


IFA president Joe Healy welcomed Kerry co-op’s move. "The decision by Kerry Co-op on patronage shares is a positive move, as it is very important that farmers are supported,” he said. “It is only correct and fair that while further investigation of this issue is undertaken, there must be no accumulation of interest or penalties for farmers."

Healy criticised the 21-day time frame for a response from farmers on the issue. Revenue has highlighted that the 21 day time limit is for a response from farmers, not for payment of any liability.

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