Farmers using up to half of their land to install solar panels will be eligible for agricultural and retirement tax relief, Minister for Finance, Public Expenditure and Reform Paschal Donohoe said in Tuesday’s budget speech.

The Revenue Commissioners caused consternation in the solar industry just one year ago when they advised that land used for solar farms was not eligible to the scheme under current rules.

Where active farmers lease farm land for solar panel use, it will be considered as eligible for Agricultural Relief and Retirement Relief

Agricultural tax relief provides a 90% capital acquisition tax (CAT) discount on land transferred through gifts or inheritance, and is essential in passing on viable farms to the next generation. Retirement tax relief provides further exemptions for older farmers who sell or give their farm as they retire.

“Where active farmers lease farm land for solar panel use, it will be considered as eligible for Agricultural Relief and Retirement Relief,” Minister for Agriculture Michael Creed said. Minister Donohoe added that eligibility “is subject to the panels covering no more than 50% of the total farm holding”.

The measure will lift the uncertainty surrounding the transfer of land tied up in long-term solar energy projects, which typically involve 30-year leases between the landowner and energy developer.

Based on the CAT rate of 33%, a young farmer inheriting a field worth €100,000 and leased to a solar developer currently stands to lose €29,700 in agricultural tax relief. The budget announcement will restore this relief provided that the solar field occupies less than half of the farm being inherited.

RHI

Budget 2018 includes €7m for the upcoming Renewable Heat Incentive. Announcements are expected later this year on the level of payment available under the scheme to biogas producers and users of heat generated from biomass such as wood and energy crops.

The budget allocation falls well short of the €90m annual budget discussed in recent talks with industry to prepare for the scheme, indicating that little activity is expected to take place next year.

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Budget 2018: what do renewable energy measures mean for farmers?

This Tuesday's budget announcements include the extension of agricultural tax relief to land used for solar farms and limited initial funding for the Renewable Heat Incentive (RHI) scheme.