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Tax advice for farmers: Lots of goodies hidden in stimulus pack

There's even a mini tax amnesty in the July Stimulus small print.

Last Thursday, the Government announced a €7.4bn jobs stimulus with the aim of helping businesses re-open, getting people back to work, and promoting confidence.

These measures will support small and medium businesses, give young people greater opportunities in training and education, support workers who lost their jobs because of the pandemic, and rejuvenate the worst affected communities.

Of particular interest to farmers in the stimulus package, under the heading of tax reliefs, is an option for farmers to step out of income averaging for the 2020 tax year.

Also, where a company expects to incur trading losses but was profitable in a prior year, carry-back of these losses will be allowed, up to 50% of losses expected. This should increase cash-flow available to such companies by way of a refund of some corporation tax paid for the prior year, with the balance to be reclaimed in the normal manner.

Also in the stimulus package is income tax relief for self- employed individuals who were profitable in 2019 but incur losses in 2020 as a result of the Covid-19 pandemic.

This loss relief will be capped at €25,000.

An additional 20% tax relief (Stay and Spend Incentive) is to be introduced where any taxpayer spends up to €625 on accommodation, food and non-alcoholic drinks between October 2020 and April 2021. Relief is capped at €125 per taxpayer, payable by way of a tax credit. There is a minimum spend; the claim will be made through a mobile app.

Detailed legislation is awaited of two other important tax measures, as follows.

  •  Any taxpayer who has outstanding tax debt should immediately review their position in light of the Stimulus announcement that the interest rate applying to agreed repayments of all tax debt will be reduced to 3%, if agreement is reached with Revenue prior to September 30 , 2020. The usual interest rates is 8-10%.

  •  Arrangements are to be put on a statutory footing whereby PAYE and Vat debts for a set period could be “warehoused”, or paid by a later date with no interest or penalties applied by Revenue, under certain conditions. This should assist short-term cash flow, in cases where payments cannot be made.

The jobs stimulus package has a green twist, with incentives to encourage sustainability. The breakdown of expenditure is more than €4bn in direct expenditure, €1bn in taxation, and €2bn as credit guarantees. Main measures in the plan are:

  •  Employment Wage Support Scheme to succeed the Temporary Wage Subsidy Scheme, and run to April 2021.

  •  0% interest for first year of SME loans.

  •  Restart grant for enterprises extended, expanded.

  •  Waiver of commercial rates extended to end of September, 2020.

  •  €2bn COVID-19 Credit Guarantee Scheme.

  •  Extension of Pandemic Unemployment Payment (PUP) to April 1, 2021.

  •  €200m investment in training, skills development, work placement schemes, recruitment subsidies, and job search and assistance measures.

  •  35,000 extra places provided in further and higher education and further supports for apprenticeships.

  •  €500m investment in communities.

  •  Investment in schools, walking, cycling, public transport, home retrofitting, and town and village renewal.

  •  Temporary reduction in standard rate of Vat (from 23% to 21%, from September 1, 2020, to March 1, 2021).

  • This will be of some benefit to unregistered farmers who may have been planning big-ticket purchases such as tractors or machinery.

  •  €20m Brexit fund to help SMEs prepare for new customs arrangements.

  •  €10m Green Enterprise Fund.

The Government has responded to the pandemic by borrowing heavily (up to 30bn this year). Capital expenditure is to be accelerated this year by €1bn. In the changes to the wage subsidy scheme (TWSS) in place to August 31, 2020, employers whose turnover has fallen 30% or more (as opposed to 25% drop in quarter two for TWSS) will receive a flat €203 per week per employee from September to April 2021. New firms operating in impacted sectors will also be eligible, as will those with seasonal staff previously locked out of the scheme.

The restart grant for enterprises is extended to a broader base of SMEs, and expanded by €300m, on top of €250m already provided. Under the current scheme, restart grants are capped at €10,000 per enterprise, linked to the amount of rates payable by the business. This is to be expanded to a max of €25,000 per enterprise. Some businesses (such as B&Bs) are newly included as eligible.

In the Credit Guarantee Scheme, the Government provides an 80% guarantee for loans and credit products from €10,000 to €1m, with terms up to six years.

As part of the capital budget allocations, €10m has been set aside for enhanced renewable energy investments for farmers and those in the fishing industry.

As the plans are fleshed out, with qualifying criteria and application forms being made available, farmers will be better positioned to determine what supports can be applied for.

For example, additional funds for on-farm renewable energy investments in the TAMs scheme, and for a large-scale habitat restoration project by Coillte, were included in an increased capital allocation of €17m for the Department of Agriculture, Food and the Marine.

“I am very pleased with the significantly growing numbers of applications under our TAMs scheme for the solar investments in particular,” commented Agriculture Minister Dara Calleary.

Also among the announcements was a €500m expansion of the Future Growth Loan Scheme.

Loan terms of more than ten years are available in the future growth loan scheme, which will sit alongside the credit guarantee scheme offering up to six-year loans.

The Howth Fishery Harbour Centre Middle Pier Re-development Project will also be financed from the DAFM allocation of €17m.

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