With Budget 2021 coming at us soon and the financial cost of Covid-19 to be met, tax reliefs could be on the chopping block.
There is no magic formula to reducing your tax bill but choosing a tax advisor who will work with you, and more importantly, know what’s happening on the farm tax scene, is definitely the first step.
Anyone can reduce tax for one year, but having a comprehensive rolling Tax Plan is key to long term planning.
This will encompass:
Reviewing your last year’s tax bill
Projecting your current year’s profit
Projecting your profit for the coming years
Reviewing your structure
This will ensure all available tax credits are used by the year end and over the next few years on stock relief, income averaging, capital allowances.
Then businesses can start looking at putting succession on the agenda and other matters that need addressing.
1. Young trained farmer relief
This exemption from Stamp Duty is to encourage the transfer of farmland to a new generation of farmers with relevant qualifications. The transfer may be made by way of a gift or sale. It applies where the young trained farmer is under 35 years at date of the transfer.
2. Blood relative relief
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 7.5%. Age restrictions on this relief have been removed. Other conditions still remain and should be reviewed before any transfer takes place. This runs until 31 December 2020.
3. Capital expenditure VAT refund
Farmers who are not registered for VAT can get a refund on the VAT element of any invoices relating to capital expenditure, for example land improvement, yards, fencing, drainage or buildings and fixed equipment, such as milking parlours, scrapers, bulk tanks, etc. (repairs are not covered.) You can claim VAT back on items purchased in the last four years. The application must be made online via a Vat 58 return.
4. Ceasing to farm VAT refund
VAT reclaimed in the 12 months prior to ceasing is re-payable to Revenue so it is important to watch the date you cease.
5. Transfer of site to a child
A site of up to one 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/ daughter’s principal private residence. If the house is not built and the site is disposed of or if the house is built but not retained and occupied for at least three years, the relief can be clawed back. Beware of the value of the site as this will reduce the threshold for gift tax.
6. Help to Buy (HTB) Incentive
The HTB Incentive, a scheme for first time buyers, is extended for two more years, to end on 31 December 2021. The scheme will continue to operate as before and remains subject to the same conditions. Between now and 31 December the amount you can qualify for has increased to €30, 000.