Dáil Éireann Debate, Wednesday - 26 January 2005
389 Ms Burton asked the Minister for Finance the number of stud farm companies and stud farm operators benefiting from the provision whereby tax exemption is given in respect of non-resident stallions (details supplied); the estimated cost of this tax relief from 1997 to date; and the basis on which this relief is given. [2070/05]
View answerThe stallion stud fees exemption was introduced in the Finance Act 1969 to encourage the development of the Irish bloodstock industry by creating an incentive for investment in Irish stallions and applied to stallions standing at stud in the State and abroad. Income arising to the owner or part-owner of a stallion from the sale of services or the right to services is exempt from tax. Losses may not be offset against other income.
Income from a stud farm is charged to tax in the same way as other profits from farming. The income charged to tax in full includes income from the keeping of mares and stallions at the farm. The only income exempt is the income arising from stallion fees. The legislation providing for this exemption was amended in the Finance Act 1985 so as to confine the tax exemption on stallion fees to income earned from stallions at stud in the State. Income arising to a part-owner of a foreign-based stallion continued to be exempted where the share has been acquired by a breeder for the purpose of acquiring new breeding lines for a bloodstock enterprise carried on in the State. The exempting measure is now contained in section 231 of the Taxes Consolidation Act 1997.
A Revenue Commissioners administrative ruling issued in November 1986, in response to a perceived downturn in the industry, confirmed that if a stallion ordinarily kept on land in the State was temporarily exported from the State for genuine commercial purposes and for a period which would not exceed two years, it would be accepted that the stallion would continue to be regarded as ordinarily kept on land in the State. This position was changed in September 1998. Since then, stallions which are sent abroad to cover mares, mainly to the southern hemisphere and commonly for a period of up to six months, are regarded as ordinarily kept on the land in the State but, except as otherwise provided for in the legislation, only those profits arising in the State are exempt.
As the Deputy is aware, it has not been a requirement under various Governments since 1969 to identify the costs of this relief because there was no obligation on a taxpayer to make a return of exempt income or profits from the sale of services of mares by stallions. However, in the Finance Act 2003 this position was changed to ensure that income or profits, although exempt, are included in the annual return of income to the Revenue Commissioners. The new requirements apply in respect of chargeable periods commencing on or after 1 January 2004. The first of these returns for individuals under self-assessment rules will be required by 31 October 2005 in respect of the 2004 tax year.
The date of the return for companies will vary depending on the company's accounting period. Where a company has a calendar year accounting period, which is the case for many companies, the return will be required by 30 September 2005 in respect of the tax year 2004. In this context the information on costs is not yet available but I hope to be in a position after the tax returns have been received and analysed to give some information in this regard.
In budget 2005, I announced that I had directed my Department and the Revenue Commissioners to carry out a thorough evaluation of the effect of certain tax incentive reliefs and exemptions with a view to introducing measures in budget 2006 that balance the benefit of such reliefs and the extent to which such incentives and exemptions are used by high earners to reduce their tax bill. I also indicated that the review will incorporate an examination of data that is due to come to hand in late 2005 on certain exempt income including stallion fees.
