Minister Coveney Must Address Taxation Implications of His Proposal on the Transfer of Single Farm Payment Under New Cap

IFA President Eddie Downey said the Minister for Agriculture Simon Coveney must address the significant taxation implications associated with his proposals to transfer entitlements from lessors to lessees in order to protect the SFP payments under the new CAP arrangements, in cases where the entire holding and all entitlements are leased out.

Eddie Downey said farmers who are forced to transfer their entitlements cannot be asked to carry the taxation costs associated with the shortcomings in the CAP agreement negotiated by Minister Coveney in respect of long-term leases involving land and entitlements. The Minister has proposed a solution to this problem, but he must also secure a solution to the taxation implications as otherwise farmers entering into these arrangements could be facing a capital tax and vat bill of well in excess of €20m.

This week Minister Coveney announced the details on leased land and entitlements under the new CAP and stated ‘the value of 100% leased entitlements may be lost to both lessor and lessee unless action is taken. Persons in this situation may avoid the loss of the value of their leased entitlements by entering into a permanent transfer of the leased entitlements under the 2014 scheme year before the 15 May 2014’.

Minister Coveney also said his Department will write to all persons who find themselves in this position to advise them of their options.

Eddie Downey said Minister Coveney has decided that the value of entitlements held by farmers in 2014 will form the basis for the calculation of the value of their entitlements under the new Basic Payment Scheme in 2015.

The Minister has previously announced that only those farmers who receive a direct payment in 2013 have an automatic ‘allocation right’ to receive entitlements in 2015 while the number of entitlements to be allocated to a farmer will be based on the lesser of the hectares declared by a farmer in 2013 and 2015.  The Minister decision clarifies the calculation of the value of entitlements in 2015.

The decision also clarifies the status of entitlements that are partially leased out in 2014 where the lessor was also paid in his/her own right in 2013 and therefore has an allocation right. The value of such leased entitlements will be attributed to the lessor rather than to the lessee. However in such cases, the lessor and lessee may enter into a Private Contract Clause (PCC) arrangement whereby the lessor may lease out together with the holding or part of it the corresponding payment entitlements that will be allocated in 2015. Such Private Contract Clause would have the effect of recognising a lease entered into under the Single Payment Scheme and carries it forward into the Basic Payment Scheme in 2015.