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Minister for Finance announces capital gains tax (CGT) exemption for new EU CAP payment arrangements

The Minister for Finance, Michael Noonan TD, today (1 May, 2014) announced his intention to provide a capital gains tax (CGT) exemption in this year’s Finance Bill to certain farmers who dispose of their single farm payment entitlements on foot of changes being introduced under the new EU Common Agriculture Policy (CAP).

A technical change made at EU level to the new CAP arrangements for replacing the Single Payment Scheme for farmers with the Basic Payment Scheme after this year impacts on farmers who let 100% of their farmland and their single farm payment entitlements. As a result of the change, farmers in this position will lose their farm payment entitlements and the Department of Agriculture, Food and the Marine has advised those farmers to sell those entitlements to active farmers by 15 May next (the deadline by which the change takes effect). Sales of farm payment entitlements in these circumstances will give rise to tax liabilities, mainly CGT but possibly VAT in a limited number of cases.

Commenting on his decision, Minister Noonan said: “This issue has been raised with me by Simon Coveney TD the Minister for Agriculture Food & the Marine. The change to the new Common Agriculture Policy which impacts on those farmers who lease 100% of their land and farm payment entitlements was made in circumstances where those farmers could not prepare for the change, having already entered into their leasing arrangements. They are therefore caught between either having to sell their farm payment entitlements or losing them under the new CAP, neither being options those farmers would otherwise have taken. In these circumstances, I am prepared to provide for an exemption from CGT on any chargeable gains arising from the disposal by the owners of payment entitlements under the Single Payment Scheme where all of those entitlements were leased out in 2013 and where the owners, because of the change in CAP regulations, were advised by the Department of Agriculture, Food and the Marine, to transfer their entitlements to an “active” farmer by 15 May 2014.

Minister Coveney welcomed Minster Noonan’s decision on this issue, which had been the subject of detailed discussions between the two Departments. He said that this issue arose due to a necessary technical adjustment arising from the recent changes in the Common Agriculture Policy regulations. Minister Coveney thanked Minister Noonan for his considered examination of the issue and its importance in terms of maintaining confidence in the long-term leasing of farmland and its contribution towards achieving the goals set out in Food Harvest 2020. By addressing this anomaly, Minister Coveney stated that it will put an end to uncertainty facing those farmers who would have been adversely affected.

The legal provisions to give effect to the CGT exemption will be included by the Minister in Finance Bill 2014 which will be published shortly after Budget 2015 in the Autumn. While the CGT due on any chargeable gains arising from the disposal of farm payment entitlements made by 15 May would have to be paid in the normal course by 15 December 2014, the Minister says that the Revenue Commissioners will not require such payments to be made pending the passing of the Finance Bill and the coming into law of the relevant CGT amendments to be included in that Bill.