2011 TAX PLANNING OPPORTUNITIES FOR FARMERS
Joe Lambe, Manager of IFAC Accountants, Raphoe Office
In dealing with farmers’ tax affairs every day, the issues that require immediate attention are:
- Increasing income tax bills together with the effect of the new Universal Social Charge.
- The government’s threat to cut back and abolish farm transfer tax reliefs.
- Is a farm limited company suitable for your farming business?
- Tax planning tips.
2011: year of opportunity for farm transfers
The current government did not draw up the National Recovery Plan 2011-2014 nor did they deliver the 2011 budget speech. However, since taking office, they have not distanced themselves from those changes signposted by the previous government.
FARM TRANSFER TAXES 2011 - WINDOW OF OPPORTUNITY
Martin Kennedy, Manager of IFAC Accountants, Templemore Office
The National Recovery Plan and the 2011 Budget states that Capital Gains Tax, Gift & Inheritance Tax and Stamp Duty reliefs and exemptions will either be abolished or greatly restricted in 2012.
Changes already made
These major changes will be in addition to the changes that have already taken place and are as follows:
- Tax-Free Amounts Reduced.
The amount that can be transferred tax-free by way of gift and inheritance has been reduced by 38% since 7th April 2009 as follows:
TAXATION IMPLICATIONS OF VARIOUS MACHINERY FINANCING OPTIONS
Michael Wheatley, Manager of IFAC Accountants, Monaghan Office for the past 18 years
The main choices open to farmers remains either outright purchase using cash generated from farm profits, financing through a Term Loan from a bank, entering a Lease or a Hire Purchase contract with a Finance and Leasing Company.
Value Added Tax
Being registered for VAT has a big cash flow advantage favouring outright purchase through cash generated from farm profits, term loan or hire purchase but not for leasing and reduces the long-term up front borrowing requirement for all options except leasing.
FARMING AS A LIMITED COMPANY - POTENTIAL TAX SAVINGS AND PITFALLS
"Recent changes to tax credits, the introduction of income levies and the universal social charge, and the upward trend in farm incomes means many farmers should review their tax structure. In cases where significant tax liabilities are arising on an annual basis or are likely to arise in the coming years as a result of decreased allowances and increased taxes, farming under a limited company structure should form part of this review."
This was stated at the recent IFAC Accountants Client Workshops held nationewide.
I have outlined in summary, the main advantages and disadvantages of farming under a limited company structure.
FARM TRANSFERS & CAPITAL TAXES - 2011 - A YEAR OF OPPORTUNITY FOR TAX PLANNING.
Declan McEvoy is the senior taxation consultant with IFAC Accountants.
The National Recovery Plan and the 2011 Budget states that Capital Gains Tax, Gift & Inheritance Tax and Stamp Duty reliefs and exemptions will either be abolished or greatly restricted in 2012.
New Civil Partnership Act has tax and farm transfer implications
John Donoghue, manager of IFAC Accountants' Tullamore office, outlines the implications for co-habiting couples under the new Civil Partnership and Co-habitants Law.
From my experience in advising farmers on farm transfers, it is vitally important to know the tax status and personal circumstances of both the person/s transferring and the person/s receiving. Once upon a time, there were only three boxes to be ticked in assembling information before advising:
- 1) Single
- 2) Married
- 3) Widowed
Income averaging coming back into fashion for 2010
Manager of IFAC Accountant's Raphoe branch, Joe Lambe, on income averaging for 2010
Much of my time this month i am spending meeting farmer clients prior to the filing of their 2009 income tax returns and assessing and planning the likely outturn for 2010 This time last year, those farmers availing of income averaging found their 2009 averaged taxable profits were higher than if they were not on averaging. Even though averaging saved them tax in 2007 and 2008, it was harder to accept the 2009 situation because of lowproduct prices and restriction on bank credit
WHAT IS INCOME AVERAGING?
Income averaging is a device negotiated by the IFA to counteract the fluctuations in farming incomes from year to year resulting from weather, yield, market conditions etc.
New IFAC Accountants’ office heralds fresh opportunities for farmers
The new IFAC office at the Old Knockmay Road, Portlaoise was officially opened on Friday 9th of July by Dr Matt Dempsey, Editor & Chief Executive of the Irish Farmers Journal. Also in attendance was Padraig Walshe, President of COPA(Committee of Professional Agricultural Organisations) and former IFA President. Both Matt and Padraig are clients of IFAC Accountants.
Seamus O’Brien, Chairperson of IFAC spoke about the origins of IFAC in Portlaoise. He went onto praise the work of former CEO Peadar Murphy and former Chairman Donie Cashman in making IFAC the organisation it is today.
The next speaker Michael McNamara, Branch Manager IFAC Accountants Portlaoise, thanked everyone for coming. "It is great to see such a turnout" he remarked. He went on to thank the staff & recorders for all their hard work and he thanked the clients for their support over the years.
WHAT'S ANOTHER YEAR - TAX AND OTHER CHANGES IMPACTING ON FARMLAND.
Declan McEvoy, Senior Tax Consultant with IFAC Accountants outlines recent changes which impact on land sales and transfers.
NEW 80% WINDFALL TAX ON REZONED LAND
Introduced in the NAMA Act the purpose of this change is to charge income tax and capital gains tax at a rate of 80% on profits from the rezoning of land.
What is meant by rezoning?
Rezoning means a change in the zoning of land in a Development Plan or Local Area Plan made or varied on/after 30th October 2009 from non-development land-uses to development land-uses or from one development land-use to another development land-use including a mixture of such uses.
GET THE BEST DEAL FROM YOUR BANK
Customers should not be afraid to negotiate interest rates when they are taking out loans. It doesn't matter if it is to re-structure existing loans or to take out new ones. Too often, customers are so happy to have found a solution that they accept whatever interest rate is going. Banks are more focused on margins and have moved to pricing loans based on the cost of funds of a mix of one, three and six-month money. Customers who maintian a good relationship with their bank are in a stronger position to negotiate the best rates.
So what interest rates can you expect to negotiate? Find out the current Euribor rate and add a bank margin of 2 to 4%. Anything over this is bad value.
TAX PAYMENT DECISIONS FACING FARMERS
John O'Callaghan, Branch Manager of the IFAC Accountants Blarney Office for the past 26 years writes on the tax payment decisions facing farmers currently.
Because of low produce prices in 2009 and limited availability of credit from the banks the level of the 2009 preliminary tax payments and the financing of these payments is of significance to most farmers.
Impact of Levies and Income Averaging on the level of 2009 tax bills
The drop in 2009 farm incomes from 2008 will not necessarily mean there will be a proportionate reduction in 2009 tax bills because of
- Income and Health Levies, and,
- Income Averaging
BANKS LOOK AFTER THEIR OWN INTEREST - WHILE FARMERS PAY UP TO 19.75% INTEREST
Pat Comerford an IFAC Accountant for over 15 years and Manager of IFAC Accountants Carlow, outlines his concerns about bank charging practices.
An increase in the banks profits from its Irish Domestic Operations is central in their economic fight back. My concern is that many farmers will end up contributing to the banks higher profits through charges in the following areas:
- Current Account Penalty Surcharges of between 6 to 12%.
- Bank Loan Protection Insurance costs which may be reduced by up to 40%.
Current Account Penalty Surcharge
Bank current account penalty surcharges vary from 6 to 12% and are in addition to the normal interest on overdraft balances. This means if you do not comply with the fundamental current account rule you will be severely penalised.
FINANCE BILL 2009
Sean O'Donnell, Manager of IFAC Accountants office in Cahir, Co. Tipperary for over 20 years highlighted the contents of the recently published Finance Bill and its implications for farmers.
INCOME LEVY
Despite strong representations from IFA the Finance Bill makes no provision to allow a deduction for capital expenditure in calculating the levy.
The Budget provides that effective from 1st May 2009 the now notorious Income Levy will be doubled and the entry point at which one becomes liable has been reduced as follows: