2011 TAX PLANNING OPPORTUNITIES FOR FARMERS
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.
Of all the taxation proposals affecting the farming sector, the language used in the capital taxation proposals causes the greatest apprehension.
The National Recovery Plan 2011-2014 and the 2011 budget speech state that the structures and thresholds in the Gift, Inheritance and Capital Gains Tax systems will be reformed in 2012. In addition, it signposts that reliefs and exemptions from Capital Gains Tax, Gift tax, Inheritance Tax and Stamp Duty will either be abolished or greatly restricted.
If the changes signposted are to be introduced in 2012, then 2011 represents a brief window of opportunity for those farmers contemplating farm transfers in the shortterm. Act now!
Can I do anything to reduce my upcoming October tax payment?
- Are you availing of your special farm tax reliefs such as income averaging, stock relief/pollution control allowances, etc?
- If you are taxable at 31% (including PRSI and levies) or higher, you may wish to examine the suitability of farming through a limited company to avail of the 12.5% corporation tax rate on trading profits.
- You may be able to reduce the 2011 payment on account if:
- You think your 2011 tax bill will be less than your 2010 tax bill. In that situation, your payment on account of the 2011 tax bill will be reduced to that figure but, to avoid an interest penalty, it must be at least 90% of what the 2011 tax bill turns out to be.
- If you pay your income tax bill by ongoing direct debit, your 2011 income tax payment on account could be reduced to 105% of the 2009 tax bill.
This could be significant if you are not on income averaging, as 2009 tax bills were relatively low. This is only a deferral or postponement of tax, giving a cashflow advantage, as the balance will be payable in October/November 2012. To avail of this option to defer tax, your direct debit must have been in place before September 2011.