What Budget 2023 means for farmers

Accelerated Capital Allowances for Slurry Storage Systems, increase in Earned Income Credit and more from Irish Exeminer, Kieran Coughlan…

The breath of giveaways in the Budget makes it almost impossible to cover without being blinded with information.

The double act of Minister for Finance Paschal Donohoe and Minister for Public Expenditure and Reform Michael McGrath threw out more goodies than Santa Claus, but there are some stings in the tail which will affect farmers.

Much of the giveaways were leaked at a rate that would put Irish Water to shame, but as the saying goes, it’s hard to hide good news.

To be fair, this gives plenty of material for column inches, but at the end of the day, most of us will want to distil down what impact the Budget will have for us personally rather than for the wider population.

With that in mind, and given the nature of this column, I think it best to start with the budget changes that affect farmers, farm families and the wider rural community.

From an income tax perspective, the increase in the lower rate income tax band to €40,000 per individual will translate to a tax saving of up to €640 per annum or, in the case of a married couple with both earning more than €1,280 per annum, effective from January 2023 onwards.

The increase in the personal tax credit and earned income credit that self-employed farmers can claim is worth up to a further €150 per annum per person.

A minor increase in the USC tax band is worth up to a further €40 per person. Five main tax reliefs applicable to farmers are being extended subject to EU State Aid approval; these being Young Trained Farmer Stamp Duty Relief, Farm Consolidation Relief and Farm Restructuring Relief extended to December 31, 2025, and Young Trained Farmer Stock Relief, Registered Farm Partnership stock relief extended to December 31, 2024.

An accelerated capital allowance scheme for the construction of slurry storage facilities is welcome but is simply affording farmers a quicker tax deduction i.e. over a shorter period, rather than enhancing the tax relief such as granting a double deduction.

Usually, slurry storage construction costs are deducted from farming profits over seven years through capital allowances of 15% in years one to six and 10% in year seven. The accelerated capital allowance scheme will allow a deduction of up to 50% per year over the first two years.

The advantage of accelerating the capital allowances is that farmers achieve a higher saving at the beginning of the project, meaning it’s easier to fund the construction costs if a taxpayer has fewer outgoings in income tax, especially where the project is either funded from cash flow or over short-term finance.

The sting in the tail for farmers is that concrete prices are set to jump as a Defective Concrete products Levy of 10% on certain concrete products, including ready-mix concrete, is set to be introduced. This comes on the back of substantially increased concrete prices already this year.

The help-to-buy/help-to-build scheme is extended until the end of 2024, which is welcome news for those who may intend on purchasing or building their first home.

Farmers, like all other households, will benefit from the energy grant expected to be paid out in three instalments of €200, the first to start prior to Christmas.

Farmers will also face an increase in both road diesel, green diesel and kerosene, with road diesel increasing from October 12 and green diesel and kerosene increasing from May 1, 2023.

This carbon tax increase will add about two cents to the price of a litre of fuel. The impact of the carbon tax increase on auto-fuels will be offset with a reduction in the National Oil Reserves Agency (NORA) levy from two cents per litre to zero cent per litre.

The extension of the 9% VAT rate on electricity and gas into 2023 will benefit the majority of farmers who are unregistered for VAT. However, the reduction in the flat rate VAT addition for unregistered farmers is significant.

For an unregistered dairy farmer milking 100 cows, the change in the unregistered VAT rebate could see €1,500 shaved off of their milk sales and cattle sales proceeds, with a corresponding direct reduction in farm profits.

A new Vacant Homes Tax (VHT) will be introduced in 2023 on a self-assessed basis and administered by the Revenue Commissioners.

The tax will apply to residential properties unoccupied for 12 months or more, albeit there are some exemptions from the new tax.

A property will be considered vacant if it is occupied for less than 30 days in a 12-month period. The tax will be charged at a rate equal to three times the property’s existing base Local Property Tax liability.

A saving grace for many farmers is that the new levy will not apply to houses which are derelict, i.e. not currently subject to the local property tax (LPT).

Farmers will also be relieved that self-employed PRSI contributions are not being increased as had been touted and that there were no dramatic changes to Agricultural Relief or gift and inheritance tax thresholds, which are so important in the context of transferring family farms.

The 2023 Budget is once again a wasted opportunity for not distinguishing the stamp duty rates between investors and active farmers or for introducing measures to address income volatility for farmers.

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What Budget 2023 means for farmers (irishexaminer.com)