Budget 2014: What will it mean for you?
on 14/10/2013 00:00:00
With this in mind, many farming families will be very anxious that there is no change to the current Capital Acquisitions Tax (CAT) Agricultural Relief, available on the transfer of farms from parents to children. This relief applies so that the value of the farm assets can be reduced by 90% and the transaction may be covered or partially covered by lifetime gift/inheritance tax thresholds.
Given last year's increase in the CAT rate to 33%, together with the reduction in lifetime tax-free thresholds (currently at €225,000 for gifts or inheritances from parents to children), many farmers feel any further restrictions in CAT or hikes in CAT or CGT rates (also at 33%) would be detrimental to succession planning for younger farmers.
However, with pressure on the Government to raise almost €900m in income from tax measures, it is hard to see how an increase in capital taxes (CGT and CAT) will not feature. In all likelihood, the rate of these taxes may rise to 35%, and the CAT tax-free thresholds could reduce even further.
There are restrictions to retirement relief from Capital Gains Tax to be introduced for those over 66 in 2014 where a €3m cap will apply to the value of the business when it is transferred, so another possible measure would be to introduce a similar restriction to CAT business relief. It certainly appears at this point that the area of capital taxes will not be saved from some changes.
The abolition of milk quotas in 2015 may provide dairy farmers with an exciting opportunity for their businesses to grow. They need to plan for this and tax issues are paramount in making these plans. To prepare for growth, stock relief will become more important. The requirement to build up their herd size will be on the agenda of many dairy farmers over the next few years.
Many are understandably anxious that the current stock relief (in most cases available at 25%) will be preserved, with the more optimistic hoping that in advance of 2015 the rate of stock relief may even increase. It is likely that there will be some reference tomorrow to this area, if even just to extend the current stock relief provisions for another year.
Everyone in this country has borne the brunt of tax increases in recent years. The agrisector, which is made up mainly of self employed individuals, has borne more than its fair share of these tax increases. For this reason farmers will be listening anxiously to the Budget tomorrow, where there may be changes to the income tax bands/credits (increasing income tax rates is unlikely) that will cause tax hikes for these individuals. Following the Mangan report's recommendations of a 1.5% increase in the rate of PRSI for self employed individuals, this is another area of potential tax pain for farmers should the Government proceed with this recommendation.
All in all, it looks like there may be some pain for the farming community on the tax side, with the only comfort being that which applies to everyone - that this is hopefully the last of the austerity budgets.
* Róisín Purcell is senior manager for tax services with PricewaterhouseCoopers Kilkenny.