THE BUDGET AND FARM TRANSFER TAXES/PRSI
Ben Fogarty, Branch Manager, IFAC Accountants, Kilkenny
Considering the exceptional times in which we live the Budget paid some recognition to the role the farming industry can play in restoring the Irish economy, boosting exports and increasing employment. Both the IFA and Macra Na Feirme deserve credit for the manner in which they presented the farming viewpoint in pre-Budget lobbying. The reduction in the stamp duty rate is significant, as is the justified retention of the 90% gift & inheritance tax agricultural relief. These positives together with current land values has overshadowed the increase in the gift & inheritance tax and capital gains tax rates from 25% to 30%, the reduction in gift & inheritance tax family exempt thresholds and the absence of a meaningful capital gains tax and stamp duty consolidation relief.
CAPITAL GAINS TAX
Increase in Capital Gains Tax Rate
For capital disposals made after 6th December 2011 the rate of capital gains tax has been increased from 25% to 30%.
€3m ceiling on CGT Retirement Relief for farmers aged over 66 years
An upper limit of €3m on Retirement Relief for business and farming assets disposed of within the family will be introduced in late 2013 where the individual transferring the assets is aged over 66 years.
Full Retirement Relief from CGT for intra-family transfers will be maintained for individuals aged 55 to 66.
Capital Gains Tax Retirement Relief on Non-Family Transfers and Sales
Currently there is an upper limit of €750,000 for qualifying assets sold or transferred outside the family by individuals aged 55 and over. This upper limit is being maintained for farmers aged between 55 and 66 years but is to be reduced from €750,000 to €500,000 for disposals after late 2013 by individuals aged over 66 years.
Capital Gains Tax Incentive to purchase property
The Budget proposes a capital gains tax holiday in respect of properties bought between 6th December 2011 and 31st December 2013. Where this property is held for more than 7 years the gain attributable to that period will not attract capital gains tax.
GIFT & INHERITANCE TAX
Tax Rate Increase
The current rate of 25% is being increased to 30% for gifts or inheritances taken after 6th December 2011.
Tax exempt threshold reduced
The tax exempt amounts which may be transferred tax-free have been reduced as follows:
|WHERE THE PERSON RECEIVING HAS THE FOLLOWING RELATIONSHIP TO THE GIVER||TAX FREE AMOUNT|
|From 06/12/2011||Up to 06/12/2011|
|Group A (Child, orphaned grandchild, favourite nephew)||250,000||332,084|
|Group B (Parent receiving a gift, grandparent, grandchild, brother, sister, niece/nephew)||33,500||33,208|
|Group C (Any other relationship)||16,750||16,604|
In January 2009 a child could have received €542,544 tax-free from their parents and it is now reduced to €250,000 i.e. a 54% decrease. Over the same period the tax rate has increased from 20% to 30%.
Transfers of commercial property (including farmland) occurring on or after 7th December 2011 will enjoy a 2% rate of stamp duty.
Transfers between Related Persons
Where the transfer is between related persons, e.g. parent, brother, sister, uncle, aunt, nephew, niece etc. the rate of stamp duty is half the rate that would otherwise ordinarily apply. The 2012 Budget proposes the abolition of this relief on 31st December 2014.
Seek professional advice on the Budget implications for your Farm Transfer Plan.
Minister for Social Protection, Joan Burton, is proposing very significant changes for new claimants of State Contributory Pension from September 2012. These changes were signalled as part of the Budget in December 2011. Justifying the move she said “the priority of pension policy is to maintain the sustainability of pensions into the future by supporting and rewarding attachment to the workforce”. Up to now, if one had an average of 48 contributions or more, one would receive the maximum Old Age Contributory Pension (see table below). The situation only altered by €5 if one had an average of 20 – 47 but the new proposals will alter this significantly.
These changes will affect a large proportion of self-employed farmers and we would recommend that you firstly seek your PRSI contribution record from Department of Social Protection in Buncrana, Co. Donegal, (or www.welfare.ie where same can be requested on-line) phone - 1890 690 690. You then should seek appropriate advice from an Accountant or registered Tax Consultant who has knowledge and experience of dealing with PRSI, as the system is complex.
Proposed New State Pension (Contributory) Rates from September 2012
|Yearly Average Contributions||Personal Rate Per Week, €|
|48 or over||230.30|
|40 - 47||225.80|
|30 – 39||207.00|
|20 - 29||196.00|
|15 – 19||150.00|
|10 - 14||92.00|
Existing State Pension (Contributory) rates in 2012
|PRSI contributions||Rate per week||Increase for a qualified adult (under 66)||Increase for a qualified adult (aged 66 and over)|
|48 or over||€230.30||€153.50||€206.30|
|20 - 47||€225.80||€153.50||€206.30|
|15 – 19||€172.70||€115.10*||€154.70*|
|10 - 14||€115.20||€ 76.80*||€103.20*|
*Qualified adult rates apply to claims made from 6th April 2001.
The changes could particularly affect women with a broken history of PRSI payments and consideration, with appropriate advice, should be given to the formation of a Partnership, where appropriate, with a possible revision of PRSI status for prior years. In some cases this may be beneficial as previously agreed between the IFA Farm Family Committee and the Scope Section in Social Welfare.