CGT tax boost for farmers

Farmers who move into a joint herd number or partnership before the 29 May 2015 Basic Payment Scheme deadline can avoid capital gains tax on the transfer of entitlements.

The clarification on the tax treatment was announced by the Minister for Agriculture Simon Coveney this week following consultation with the Department of Finance and the Office of the Revenue Commissioners. The key decision was to put at zero the base cost for capital gains tax purposes of entitlements established under the Basic Payment Scheme.

The Minister said: “As BPS entitlements will only be established at the 29 May 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 before the BPS deadline.

“This is of particular relevance to those participating in the Young Farmers Scheme or the National Reserve as a young farmer or new entrant,” the Minster added.

Farmers transferring the entitlements should identify if they want to transfer 50% of their entitlements or a different percentage. Farmers should get advice on the implications from a tax and succession planning viewpoint.

The decisions will have no practical effect on those who have held their entitlements since 2005, when the base cost was also zero. However, it has implications for farmers who bought entitlement or inherited in the last regime as they have a capital loss. This can be crystalised in 2015 and carried forward to write off against a capital gains, saving up to 33% tax.

IFA Farm Business Committee chairman Tom Doyle has said the clarification that has been provided by the Minister for Agriculture on the taxation treatment of the Basic Payment Scheme entitlements was important for many farm families.

He added that for farmers who purchased Single Farm Payment entitlements in the last reform, it must be a straightforward process to offset the capital loss that they have experienced due to the expiration of these entitlements against future capital gains.