Farmers will have to pay tax on all payments made under the ash dieback scheme, the Department of Agriculture has confirmed.

This was confirmed at a recent meeting of the Ash Dieback Task Force when farmer representatives were told that all payments will be subject to universal social charge (USC) and PRSI.

A once-off payment was sanctioned by the Government earlier this year to farmers who agree to take out diseased trees and replant their forestry.

The Climate Action Performance Payment (CAPP) is worth €5,000/ha and open to plantation owners who are in the Reconstitution Ash Dieback Scheme.

USC is payable at rates of 0.5% to 8%, depending on income, and PRSI at 4%. This must be paid by farmers as part of their annual tax bill.

Standard practice

The Department of Agriculture has defended the application of USC and PRSI on the ash dieback scheme, pointing out that this is standard practice across all forestry payments.

“Payments under the CAPP scheme, as with all forestry scheme payments, are exempt from income tax by virtue of section 232(2) TCA. However, USC and PRSI may apply,” a Department spokesperson said.

However, Derek McCabe of Irish Forestry Owners said he was disappointed that a scheme which was designed to compensate plantation owners for a portion of the losses incurred due to ash dieback was now being treated as income and taxed.

A farmer with 10ha of diseased ash, who was expecting a payment of €50,000 under CAPP, could now lose up to €5,000 to tax, McCabe pointed out.

There was no mention of the payments being subject to USC or PRSI when the €79.5m CAPP scheme was announced, McCabe commented.

The forestry leader asked how the imposition of taxes on the CAPP could be justified when measures such as the Turf Cutting Compensation Scheme were exempt.