28 Jun, 2018

Tax Tips 2018

As we enter into a new year, farmers should ask themselves “what can I claim when it comes to tax breaks or deductions?" and "how do I reduce my tax bill in 2018?". Because every farmer is different, there's no easy answer to this complicated question. However, there's a long list of tax saving tips that can reduce taxable income. Farmers should use every available tax saving tip to which you're entitled because overlooked tax deductions are wasted opportunities. From reducing your income tax to ensuring that inheritance tax and capital gains tax allowances are best used to reduce your taxable income, this is a must read for all farmers.

Tip #1

If you made disposals of chargeable assets between 1 December 2017 and 31 December 2017, and realised a chargeable gain , any Capital Gains Tax arising on that gain must be paid on or before 31 January 2018.

Tip #2

Changes to Succession 2018

Where a deceased person bequeaths land in a will and:

  • At the time of his or her death held an allocation of payments entitlements under Regulation 1307/2013

  • Made no provision for those payment entitlements in his or her Will

Such payment entitlements (or share thereof) shall transfer with the eligible land unless there is a legal impediment preventing the transfer.

Explanatory Note: This Statutory Instrument now provides legal basis to the Department of Agriculture, Food and the Marine for the inheritance of Basic Payment Scheme entitlements where the Will of a deceased farmer is silent in relation to these entitlements. The SI provides for the Entitlements to transfer with the land in such circumstances.

Tip #3

Farm Consolidation Relief:

A 1% rate of Stamp Duty applies for a period of 24 months from 1st January 2018 to 31st December 2020 for instruments executed after 1/1/2018. To qualify the person purchasing must retain ownership and use the land for a period of 5 years from the date in which the relief is claimed.

Tip #4

4 year rule on reclaiming

Have you reclaimed all your medical expenses since 2014? 2018 is the last year to claim unclaimed credits for 2014.

Tip #5

You must file a return for any 2017 gains or losses by the return filing date in 2018. Preliminary tax for Capital Gains Tax is due as follows:

  • Disposals up to 30th November 2018 due by 15th December 2018

  • Disposals in December 2018, tax due 31st January 2019.

Capital gains tax, at a rate of 33%, applies on all disposals whether or not consideration (money) passes. With this in mind, availability of reliefs is paramount to minimising the tax.

An annual exemption of €1,270 applies. Therefore you can make a gain of €1,270 and no gain applies.

Tip #6

Ceasing to farm

Vat reclaimed in the last 12 months prior to ceasing is repayable to revenue. Watch the date you cease.

Tip #7

Stamp duty relief has been enhanced so that any transfer of farm assets between blood relatives is subject to 1% stamp duty instead of the new 6%. Age restrictions on this relief have been removed. Other conditions still remain and should be reviewed before any transfers takes place.

Tip #8

It is vitally important that all off-shore property and income arising from same is correctly reported in your annual income tax return. Significant penalties will arise where off-shore property is not included, or incorrectly returned in your income tax return

Tip #9

Is your family working on the farm? Are they involved in the farm business?

Remember a child living at home can earn €8,250 with no tax, PRSI or USC. The child must make a commercial contribution to the farm, must be registered as an employee and an annual employer return must be made

Tax Tip #10

A new succession credit of up to €5,000 is available for transfers of the farm for up to 5 years. You must agree enter into a registered farm partnership and then transfer to a registered succession partnership to avail of the credit

Tax Tip #11

As either a home owner or landlord, one can get a tax credit of 13.5% up to a spend of €30,000 under the Home Renovation Scheme. Only available where all taxes up to date and you use a registered contractor who has charged you VAT at the reduced rate. This scheme is due to cease on the 31st December 2018

Tax Tip #12

With companies being used by farmers the following are important:

  • Ensure you lodge your corporation tax return on time - A late return can result in penalties and loss of reliefs.

  • Ensure the company pays you a salary - This will enable you to get benefits paid for by the company.

  • The benefit will be taxed on you as salary but will be taxed as a cost to the company.

  • If you take out the funds yourself and pay it yourself it will cost you more in tax

Tax Tip #13

Capital Acquisitions Tax returns must be filed by 31st October 2018 on any gift/inheritances received in the year to 31st August 2018.

  • Gift tax applies to applies to a lifetime transfer.

  • Inheritance tax applies to a transfer on death.

The thresholds that one can receive tax free are as follows:

Class A -parent €310,000

Class B. - Relative €32,500

Class C - Non blood relative €16,250

Tax Tip #14

Vat 58 form

Reclaim by unregistered farmers on capital expenditure. You are entitled to reclaim vat on capital expenditure on buildings yards, fencing, drainage etc. and fixed plant. You only have 4 years to reclaim the vat - You can only reclaim back to 2014 at this stage. Reviewed your vat reclaims and ensure you have reclaimed all you are entitled to.

Tax Tip #15

A site of up to 1 acre and up to a value of €500,000 can be made free from capital gains tax. It must be for the construction of the son or daughters principal private residence. If the site is disposed of or the house is not built the relief can be clawed back. Beware of the value of the site as this will reduce the threshold for gift tax.

Tip #16

Agricultural Relief in Capital Acquisitions Tax reduces the value of the asset you are receiving by 90%. It you receive 2m of agricultural property you will only be taxed on €200,000 i.e. 10% of its value. Ensure you meet the conditions to qualify for this relief. Beware of clawback of the relief if you fail to satisfy the conditions. Relief has been extended to include land let to Solar Panel companies. This land will only be considered agricultural property where less than 50% of the land being transferred is under Solar Panels

Tip #17

If you do not qualify for Agricultural Relief under Capital Acquisitions Tax, Business Relief may be available. It applies to transfer of a business or part of a business, not to an individual asset. As with Agricultural Relief, it reduces the value of the asset by 90%, meaning you only get taxed on 10% of its value

Tip #18

If you are selling the farm or a portion of the farm where you completed buildings within 5 years of the VAT reclaim, you will be liable for VAT on the sale. Review the reclaim history and be aware of any VAT liability.

Tip #19

As of January 2017, Entrepreneur Relief is available on the sale of all or part of a farm business. The relief reduces the capital gains tax rate on qualifying sales to just 10% (on gains of up to €1m). The relief does not apply on the disposal of investments or development land. Contact your local ifac office for more information on entrepreneur relief or specific tax advice on your asset sale.

Tax Tip #20

One can receive by way of a gift an amount of €3,000 from any person in a calendar year without affecting your threshold. No gift or inheritance tax applies between spouses

Tip #22

You can pay wages to your family if they are involved in the business, but be sure you are paying the correct rate of PRSI. For clarification visit https://www.welfare.ie/en/downloads/sw102.pdf or contact your tax advisor.

Tip #23

Capital gains tax relief has been extended to include land let to Solar Panel companies. This land will only be able to avail of this relief if the land under Solar Panels is less than 50% of the total land being sold

Tip #24

Company directors and employees can receive a one off tax (and PRSI) free voucher of €500 from their employer each year. If you are a company director or business owner, contact your local ifac office to find out more about tax free vouchers and other top tax saving tips and strategies.

Tip #25

If you own a property which is of national, scientific or artistic interest as defined under section 77 of the capital acquisitions tax act, it may be exempt from capital acquisitions tax. There are 2 broad categories of property that qualify for the relief, heritage objects including books, works of art or other objects of nature which the Revenue Commissioners deems of scientific, historic or artistic and historical houses and gardens.

The property must be held in the state, with reasonable access to the public granted and cannot be used for the purposes of trading. The property must be retained by the successor for at least 6 years afterward, with reasonable public access granted at all times. In the case of houses and gardens reasonable facilities for viewing must have been allowed to the public during the three year period prior to the date of the gift or inheritance.

To find out more about Capital Acquisitions Tax reliefs and tax planning contact your local ifac office