BUDGET 2013 - SAVINGS GUIDE FOR FARMERS
Declan McEvoy A.I.T.I., T.E.P., Senior Tax Consultant, IFAC Accountants Declan McEvoy, A.I.T.I., T.E.P., Head of Tax, IFAC Accountants and Martin Kennedy, Branch Manager, IFAC Accountants, Templemore, highlight areas where planning ahead could save you money
INCOME TAX
The income tax rates and tax bands together with income tax credits have, in the main, remained unaltered. This article is not meant to be a blow-by-blow account of what the Minister announced, rather it will highlight areas where planning will save you money.
PENSION CONTRIBUTIONS – RESTRICTION IN TAX RELIEF
The Government has signified its intention that, with effect from 1 January 2014, tax relief for pension contributions will be capped and restricted to delivering pension income of up to €60,000.
TAX PLANNING ACTION
Consult your tax adviser and pension planner to maximise and avail fully of existing tax reliefs and ceilings before they are restricted/phased out.
TAX PLANNING IN THE CURRENT CLIMATE
Declan McEvoy A.I.T.I., T.E.P., Senior Tax Consultant, IFAC Accountants
Whilst recognising that farm income will be down in 2012 one should not lose sight of the Income/Corporation Tax position of the business.
Proper tax planning can help to minimise cash extraction out of the business thus ensuring that the maximum amount of profits are retained.
Preliminary tax payments fall due over the next couple of months and awareness of your profit could lead to you paying the minimum amount of tax.
Why not use the preliminary tax rules to the maximum!
A TAX PLAN TO SUPPORT YOUR DAIRY EXPANSION INVESTMENT
Management, Financial & Tax Planning Steps
Martin Kennedy, Branch Manager, IFAC Accountants, Templemore
As an accountant and a dairy farmer I have experienced planning for dairy expansion from both sides. Pre-planning is vitally important.
My role as an Accountant
The farmer together with his agricultural advisor/consultant should prepare the information for the 5 year projection of annual profits which will include a sensitivity analysis taking into account the impact of milk price fluctuations and input price increase scenarios. From this I;
- Prepare a projected cash flow.
- Design a tax structure which will minimise tax to the greatest extent and tie the structure in with the business plan and cash flow.
- Assess those figures to determine whether the projected profits after tax minus capital expenditure, capital repayments and living expenses will meet annual repayments.
A common pitfall
A common pitfall and danger is the flawed assumption that the pre-tax profits will be fully available to meet living expenses, capital requirements and bank repayments. However, before it comes to this stage the farmer together with is Agricultural Advisor/Consultant has groundwork to do.
Finance Bill 2012: Tax Planning
TAX CHANGES WILL INCREASE THE POTENTIAL OF LAND AS AN INVESTMENT
Declan McEvoy A.I.T.I., T.E.P., Senior Tax Consultant, IFAC Accountants
Last week’s Country Property section of the “Journal” stated that anecdotal evidence suggests that cash rich individuals have stood on the fence over the past few years in anticipation that the price of land would fall further but the uncertainty of the euro coupled with the instability of leaving large volumes of money on deposit, has sparked an increasing interest to buy agricultural land in recent months. The Finance Bill published last week adds further to the potential of land as an investment.
FINANCE BILL 2012
The Finance Bill contains Stamp Duty and Capital Tax changes which will make investment in farmland more attractive to farmers and non-farmers alike.
TAX IMPACT
Tax changes outlined in the 2012 Finance Bill should make agricultural land more attractive as an investment for farmers and non-farmers alike
Declan McEvoy A.I.T.I., T.E.P., Senior Tax Consultant, IFAC Accountants
The recently published Finance Bill sets out the proposed legal wording to give effect to the 2012 Budget. There will of course be some amendments to the Bill as it makes its journey through both houses of the Oireachtas.
The changes outlined below, I feel, should increase the potential of farmland as an investment for farmers and non-farmers alike.
CAPITAL GAINS TAX
7 Year Capital Gains Tax Holiday will apply to farmland
It was originally thought that this tax incentive would only apply to houses and property which were purchased during the Celtic Tiger era and possibly only apply to NAMA properties. The Finance Bill states that this relief will apply to land or buildings (situated in an EEA State) which
- Is acquired on or after 7th December 2011 and up to and including 31st December 2013, and
- Continues in the same ownership for a period of at least 7 years from the date the land or buildings were acquired.
THE BUDGET AND FARM TRANSFER TAXES
Pat Comerford, Branch Manager, IFAC Accountants, Carlow
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.