Department of Finance officials are reviewing a range of tax reliefs applied to the farm sector ahead of Budget 2023 including whether young trained farmer and farm consolidation stamp duty relief should be extended and if so, for how long. Both tax reliefs are due to expire at the end of 2022.
Young trained farmer relief allows a total stamp duty exemption and is currently afforded to farmers under 35 who hold a relevant agricultural qualification, submit a business plan to Teagasc and are head of the farm holding.
Farm consolidation relief (1% of value difference) applies when a farmer sells land and buys other land to consolidate their holding.
The Irish Farmers Journal can reveal that the Department is also examining how to streamline the process through which farmers list the educational qualifications required to avail of a number of agri-tax reliefs.
The reviews were noted in papers from the Department’s Tax Strategy Group (TSG). Each year, the group prepares various options for tax policy changes ahead of Government’s budget.
Young trained farmer relief
The core purpose of the young trained farmer stamp duty relief is to “promote lifetime transfers of land and encourage more young people to pursue farming”, says the TSG.
In its analysis, it found that some €15.01m had been “foregone” by the Irish state in 2021 through the young trained farmer relief, under claims by 1,278 individuals. This is up from a low of €3.7m foregone and 714 individuals in 2013.
The stamp duty relief for young farmers was last extended (by three years) to 31 December 2021 as part of the Finance Act 2018. Under the Finance Act 2021, it was granted a further one-year extension to the end of 2022.
The TSG says that as this extension is due to expire at the end of this year, Department officials will now make a recommendation on whether or not it should be extended to the Minister for Finance in advance of Budget 2023.
As the relief is deemed a form of state aid permissible under the Agricultural Block Exemption Regulation (ABER), it can only be extended under the terms of an ABER.
TSG paper states that the duration of any further extension of the young trained farmers stamp duty relief is dependent on the introduction of a new ABER or the further extension of the existing one.
Farm consolidation stamp duty relief
Farm consolidation stamp duty relief allows for a 1% rate of stamp duty (as opposed to the general rate on non-residential property of 7.5%) when a farmer first sells, then buys new agricultural land, consolidating their holding.
The TSG found that €1.2m was forgone by the state in 2021 following 105 successful claims from farmers.
The relief’s purpose is to encourage the consolidation of farm holdings, in order to reduce farm fragmentation and therefore improve the operation and viability of farms.
The 1% duty is applied on the difference in value between the two land parcels where the acquisition and disposal take place within a 24-month period of each other. The land transactions must qualify for a "Farm Restructuring Certificate" from Teagasc.
The relief, in its current form, was reintroduced in Finance Act 2017 and a similar relief expired on 30 June 2009. Having last been extended for two years in Budget 2021, the farm consolidation relief is also due to lapse at the end of 2022.
In reviewing the merits of another extension, the TSG papers note that the Department of Finance is aware of suggestions that the amount of time allowed to expire between the “matching” sale and subsequent purchase of farmland, current at 24 months, should be extended to 36 months.
The TSG says the consolidation relief is also part permitted under the current ABER and therefore, a new ABER or the further extension of the existing one is required.
Listing educational qualifications
The TSG paper states that the Department of Finance is also working to streamline the process for listing the educational qualifications required to avail of agri-tax reliefs including the stock relief for young trained farmers, stock relief for registered farm partnerships, succession tax credit, Agricultural (Capital Acquisitions Tax) Relief and the young trained farmer stamp duty relief.
The TSG says the qualification listings process required hasn’t been updated in recent years and therefore, a review is underway.
While outlining the review of the stamp duty relief measures available to farmers, the TSG papers also note that “the agri-food sector is our most important indigenous exporting industry, playing a vital role in the economy, with 135,000 farms producing over €9.5bn in output annually.”
“In 2021 agri-food exports accounted for 9.3% of total merchandising exports, with a value of €15.4bn, marking growth of 50% since 2012,” it said.