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Dáil Éireann debate -
Tuesday, 12 Jun 2001

Vol. 537 No. 5

Written Answers. - Tax Reliefs.

Willie Penrose

Question:

262 Mr. Penrose asked the Minister for Finance the stamp duty and other taxation exemptions and reliefs available to a young qualifying farmer who is under 35 years of age and has achieved the necessary educational qualifications, and who is taking over his parents' land as they are retiring from farming; if any additional exemptions were made available in recent budgets; and if he will make a statement on the matter. [16766/01]

In order to promote lifetime transfers of land and encourage more young people to pursue farming, the Finance Act, 1994, provided for a two thirds relief from stamp duty on the transfer of land to a young trained farmer. This relief was introduced for a three year period and was extended for a further three years until 31 December 1999 in the Finance Act, 1997. Under the terms of the Programme for Prosperity and Fairness, the two thirds relief was increased to a full relief in the Finance Act, 2000, for three years until 31 December 2002.

For the purposes of the relief a "young trained farmer" is one who is under 35 years of age at the date of execution of the transfer and is the holder of one of the specified qualifications, for example, the Teagasc certificate in farming or, if born before 1 January 1968, has three years experience in farming together with satisfactory completion of Teagasc training courses in agriculture and horticulture of 180 hours duration.

Where the transferee has completed at least one academic year of the Teagasc certificate in farming at the date of execution of the transfer, he or she may obtain the relief by way of a refund, provided the qualification is obtained within three years of the date of execution of the transfer.

There is provision in legislation for 90% relief from capital acquisitions tax, CAT, in respect of gifts and inheritances of certain agricultural property. The latter may include agricultural land, farmhouses, farm buildings, farm machinery and bloodstock. The relief is not restricted to, but would include, young qualifying farmers. To avail of the relief 80% of his or her gross property must, after the taking of the gift, comprise of agricultural property, livestock, bloodstock and farm machinery.

Where the donee has taken no prior gifts or inheritances from either or both of his or her parents since 2 December 1988 and is receiving a gift of agricultural land from parents, he or she may also avail of the group one exempt threshold which applies where the donee is a child of the disponer or disponers. This amount is currently £316,800. Therefore, a child can take a benefit of £3,168,000 in qualifying assets from a parent or parents free of CAT, that is, 90% relief worth £2,851,200 plus the balance of 10% or £316,800 which is covered by the threshold.

Certain full-time farmers can avail of income averaging where, instead of being charged to tax on their farming profits in the normal way, that is, on the profits of a 12 month period ending in the year of assessment, a farmer may elect to be charged on the basis of the average of the aggregate farming profits and losses of the three years ending in the year of assessment. In effect, one third of the profits for the three years is charged for a year. Farmers who, or whose spouses, carry on another trade or profession or who are directors of companies which carry on a trade or profession cannot elect for income averaging. An exception is provided for in the case of the provision of farmhouse holidays. Once an election for averaging is made, a farmer must remain on averaging for a minimum of three years. If the farmer wishes to revert to the normal basis of assessment, the two years of assessment immediately before the final year of averaging are reviewed and, if necessary, additional assessments are made to ensure that the amount charged for each of those two years is not less than the amount charged for the final year of averaging.

Persons chargeable to tax on their farming profits may claim a farm buildings allowance for capital expenditure on the construction of farm buildings other than buildings used as a dwelling and certain other works such as fences, roadways, holding yards, drains, land reclamation and other works such as walls, water and electrical installation and sewerage. The cost is written off at the rate of 15% of the cost in each of the first six years with the remaining 10% in year seven.
Farmers may also avail of a special scheme of capital allowances for farm pollution control where qualifying expenditure on necessary measures has been incurred. This scheme, which was introduced in the Finance Act, 1997, originally applied for three years from 6 April 1997 to 5 April 2000. It provided for a special year one allowance limit of 50% of expenditure incurred or £15,000, that is, 50% of £30,000, whichever is the lesser. The rest of the expenditure can be written down over seven years giving a total write down period of eight years. The limit was increased to £20,000, that is, 50% of £40,000, in the budget with effect from 6 April 1998.
The Finance Act, 2000, made a number of changes to the scheme. It extended the scheme for a further three years to 5 April 2003. For expenditure incurred on or after 6 April 2000, it reduced the writing down period from eight to seven years. It also increased the limit to the lesser of 50% of the expenditure or £25,000, that is, 50% of £50,000. It converted the year one allowance into a floating allowance to be taken in whole or in part at any time over the writing down period.
Farmers can also avail of the general five year write off period, that is, 20% per annum, for capital allowances for plant and machinery, which was introduced in the 2001 budget.
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