THE ICMSA has produced a simple guide to Budget 2011 for farming familys.
The guide goes through the changes affecting farmers in terms of schemes, taxation and social welfare measures.
1. No Change in Payment Level for Main Agriculture Schemes
The key schemes in relation to agriculture have seen no reduction in their rates. This means that for 2011, farmers participating in the Disadvantaged Area Scheme, REPS 4, AEOS and the Suckler Cow Welfare Scheme will receive the same rate of payments as 2010. While this may be taken as a positive, it should be noted that payment rates under these schemes have seen substantial cuts already and farmers are getting lower rates than they did in 2008.
2. New Agri-Environment Options Scheme
With many farmers leaving REPS 3 in 2010, it is hugely important that a replacement scheme for REPS 3 is available to farmers. ICMSA lobbied for a replacement scheme and welcomes the decision to re-introduce an AEOS scheme for 2011. However, ICMSA is disappointed that the scheme has a payment limit of €5,000 and a maximum of 10,000 farmers. ICMSA is insisting that the scheme will be opened in early 2011 and that the options available to farmers within the scheme will be extended so that the scheme will become more relevant and available to active farmers.
3. Farm Waste Management Scheme Payments
The Minister for Agriculture has confirmed that up to €100 million of the final installment of the Farm Waste Management Scheme which was due to be paid early next year, is now being brought forward to this month. This means that about 14,500 farmers out of a total of 17,600 will receive their payment in December rather than January. The remainder of the farmers will receive their payment in January and in addition, all farmers will receive the ex-gratia interest payment in early 2011 agreed when the payment was staggered over three years.
4. Suckler Cow Welfare Scheme
In Budget 2009, the decision was taken not to pay the 2009 payment until 2010 and this continued for the 2010 payment.The Minister has now decided to change the policy with the result that the farmer will now receive payment for both 2010 and 2011 in 2011.
5. Additional Funding for On-Farm Investment Schemes including Dairy Investment Scheme
The Department has allocated €19 million for the Department's Targeted Agricultural Measures, which includes a new scheme for dairy farmers to adjust to expanding dairy opportunities; aid for sheep fencing and handling facilities; and animal welfare grants for pig and poultry producers. The decision on how much funds will be allocated to each scheme has yet to be taken but ICMSA will be lobbying for a substantial portion for the dairy scheme. It is expected that a decision on how much funding will be allocated to each scheme will be taken in early 2011.
1. Tax bands
Tax bands will be decreased by 10% across the board.The top rate of 41% will now apply on all income above €32,800 €36,400 in 2010) in the case of a single person. For married couples with one income the 41% rate will apply at €41,800 (€45,400 in 2010).
Personal tax credits have also been reduced by 10% across the board.The personal tax credit for a single person will be cut to €1,650 from €1,830.The tax credit for a married couple will be reduced to €3,300 from €3,660.
3. Universal Social Charge (USC)
The Health Levy and the Income levy will be abolished and replaced by a new USC at the rates and thresholds shown in the Table below:
USC payable on annual income
Less than €4,004 -0%
€0 - €10,036 - 2%
€10,037 - €16,016 - 4%
Greater than - €16,016 - 7%
The USC will apply on a similar basis to the Income levy with no special exemptions other than a lower rate being applied to income earners over 70. There will be an important exemption from the USC for 'genuine' capital allowances used in business. The ICMSA has received confirmation on this matter and all farm related capital allowances are deductible from this charge.
Please note that even where accelerated/pollution related capital expenditure does not apply – all normal capital allowances will apply to the new USC. In contrast, normal capital allowances do not apply to the income base used to calculate the Income Levy.
The Self-Employed rate of PRSI is increased from 3% to 4%. As a result of this increase, a farmer earning €40,000 will pay an additional €400 in PRSI per year.
5. Stock Relief
The existing 25% stock relief for farmers and the special incentive stock relief of 100% for certain young trained farmers are being extended from 1 January 2011 for a further two years
The rates charged on the transfers of residential property have been reduced to 1% for properties valued at up to €1 million with 2% applying to residential properties valued in excess of this. These rates will apply to residential property only and will not apply to agricultural land. The existing rates of Stamp Duty apply to agricultural land.
However, this has an adverse effect in relation to transfers of a site to a child, which is currently exempt, but will now incur the 1% rate. There is no change applying to the rates applying to agricultural land where the top rate is 6%. ICMSA has sought changes to Stamp Duty on agricultural land transfers particularly in relation to consolidation.
7. Capital Acquisitions Tax.
The current tax-free thresholds are being reduced by 20 percent. This reduction applies in respect of gifts or inheritances taken from midnight on December 7.
The Minister proposed no other change either in the rate or the level of agricultural relief in the budget. However, it is important to realise that the National Recovery Plan, of which the 2011 budget in effect forms part of, states that in addition to the broadening of the base for CAT and Capital Gains Tax – the level of relief and exemptions applying to these taxes will be reduced. This will probably not take effect before 2012.
This is an area where a person or a family contemplating a transfer of property should take professional advice in anticipation of a less favourable CAT system. There is some indication of possible changes (I stress indication not decisions), arising from the Commission on Taxation Report, that agricultural relief could be reduced. Agricultural relief is the formula to reduce market value to taxable value. It currently stands at 90%.
Any reduction in agricultural relief, combined with the recent (over 40%) reduction in the thresholds could very well bring medium sized farms into a CAT liability for parent to child transfers. This is more so in the case of transfers other than from a parent to a child. Finally the rate of tax to the taxable amount (market value less all deductions and reliefs) was recently increased from 20% to 25%. ICMSA are watching this particular tax as it evolves very closely. Our aim is simply to ensure we do not get the effective reintroduction of death duties on normal farm transfers.
9. Capital Gains Tax
While no reference is made to Capital Gains Tax (CGT) in the budget speech, again major but unspecified changes are flagged for CGT in the National Recovery Plan, which may give rise to restrictions of reliefs and exemptions and an introduction of an increased rate of CGT above the current rate of 25%
10. Accelerated Capital Allowances for Pollution Control Investment
The Minister for Finance has not renewed the scheme of accelerated capital allowances for farmers who incur capital expenditure on farm buildings and structures for use in the control of pollution with effect from 31 December 2010. The consequences of this is that such investments post 2010 in farm pollution control will have to written off over seven years compared to three under the accelerated allowance scheme.
Social Welfare Measures
1. Farm Assist
The cuts in the social welfare budget will result in a reduction in the Personal Rate of Farm Assist from €196 to €188 and a cut in the Qualified Adult Allowance from €130.10 to €124.10.
There has been no change to the old age contributory or non-contributory pension.
Tax changes to self funded pensions: There are tax changes to the funding of self funded pensions and individual farmers should get professional advice as necessary.