Reducing the tax bill

reilig

Lads, a relation of mine is a pensioner and farms about 40 acres. He isn't over stocked and hasn't many bills coming in the door. He's doing it to keep occupied and he has a son abroad who intends taking over the farm in a couple of years time. His wife is working off the farm. He keeps a few sucklers, gets a small SFP and a small REPS Payment.

However, this year he has a profit of over €12k. Now that's great, but along with his pension, he's going to end up paying tax on the €12k.

What can he do to minimise tax in the years to come?

Anyone got any sensible suggestions?

Dampintheattic

reilig wrote: »

Lads, a relation of mine is a pensioner and farms about 40 acres. He isn't over stocked and hasn't many bills coming in the door. He's doing it to keep occupied and he has a son abroad who intends taking over the farm in a couple of years time. His wife is working off the farm. He keeps a few sucklers, gets a small SFP and a small REPS Payment.

However, this year he has a profit of over €12k. Now that's great, but along with his pension, he's going to end up paying tax on the €12k.

What can he do to minimise tax in the years to come?

Anyone got any sensible suggestions?

€12k profit, from just a few sucklers and a small SFP.
He should be in the Journal, as a "better farmer":cool:

delaval

reilig wrote: »

Lads, a relation of mine is a pensioner and farms about 40 acres. He isn't over stocked and hasn't many bills coming in the door. He's doing it to keep occupied and he has a son abroad who intends taking over the farm in a couple of years time. His wife is working off the farm. He keeps a few sucklers, gets a small SFP and a small REPS Payment.

However, this year he has a profit of over €12k. Now that's great, but along with his pension, he's going to end up paying tax on the €12k.

What can he do to minimise tax in the years to come?

Anyone got any sensible suggestions?

Not credible??
Are these his own figures or his accounts?

Sorry but not credible diesnt mean I don't believe you!!!

reilig

Ah jasus lads, I asked for tax saving tips, not questions about my credability. :rolleyes:

Why isn't it credible?

€8k SFP, 4k REPS, DA Payment, etc.

These are his accounts.

Marooned75

Sign it over to his son now.

countryjimbo

First I would say to ensure the profit figure is correct, its possible the accountant isn't digging too deep.

Check that all assets are being claimed under capital expenses (machinery, sheds, drainage (often left out!)
These are claimed over 8 years so if there are any which have not been included even if they were bought before this year I think they can be included - check with accountant.

Then there are things like machinery maintenance, tires, fuel, may not have proper receipts but might get away with estimates.
Portion of car expenses, i.e. is 1/3 of it related to farm business and rest personal?

Ensure there are Vet fees, AI, medicines / sprays.

Claim for refuse collection, water charges, profession fees (reps planner).

Once the profit is worked out there's not much more you can do but pay tax as its last year.

Things like fencing, reseeding, draining are good re-investments to limit tax but can not be done for last year.
Good idea to get an estimate of next years tax bill now and take measures before the end of the year if necessary.

I'm taking this from my experience with what my father often leaves out :rolleyes:

Dampintheattic

reilig wrote: »

Ah jasus lads, I asked for tax saving tips, not questions about my credability. :rolleyes:

Why isn't it credible?

€8k SFP, 4k REPS, DA Payment, etc.

These are his accounts.

He should get into more sucklers. They won't be long, sorting out his tax problem:D

reilig

Marooned75 wrote: »

Sign it over to his son now.

He wants to farm. He just wants to reduce his tax liability.

reilig

Dampintheattic wrote: »

He should get into more sucklers. They won't be long, sorting out his tax problem:D

Read the question

Anyone got any sensible suggestions?

vanderbadger

would he not be under the taxable income threshold at that type of money?

Marooned75

reilig wrote: »

He wants to farm. He just wants to reduce his tax liability.

As said here earlier find all things he can write off

onyerbikepat

Agree with Countryjimbo's post above, make sure he is claiming for everything he can. After that the purchase of a new machine, tractor etc will help keep down tax in the future. Just to be sure it's a machine that will make life easier down teh line and not just bought for tax reasons.

reilig

vanderbadger wrote: »

would he not be under the taxable income threshold at that type of money?

No, he has a substantial pension.

maxxuumman

Buy a new tractor. New jeep might be handy aswell.

whelan1

was with accountant this morning, ffs i got a fright, i told him to come back to me when the figure payable is halved:eek: he had told me earlier in the year he still had work to do on it

vanderbadger

whelan1 wrote: »

was with accountant this morning, ffs i got a fright, i told him to come back to me when the figure payable is halved:eek: he had told me earlier in the year he still had work to do on it

you could make a voluntary pension contribution whelan if you have tax to pay

whelan1

vanderbadger wrote: »

you could make a voluntary pension contribution whelan if you have tax to pay

yes, i already have money going in there, i also pay premliminary tax every month by dd, i thought this would ease what i have to pay...it nearly killed me each month to pay this as it comes out on 9th of each month- date cant be changed, edited to say we had been using the 3n year averaging and 2009 dropped off, leaving 3 goodish years

reilig

whelan1 wrote: »

yes, i already have money going in there, i also pay premliminary tax every month by dd, i thought this would ease what i have to pay...it nearly killed me each month to pay this as it comes out on 9th of each month- date cant be changed, edited to say we had been using the 3n year averaging and 2009 dropped off, leaving 3 goodish years

What were you saying earlier in the year about a tax saving with a Category a or b tax car registered in or after 2008?

hugo29

reilig wrote: »

Read the question

send him to lakill, reilig

rest of us are only speculating

rancher

delaval wrote: »

Not credible??
Are these his own figures or his accounts?

Sorry but not credible diesnt mean I don't believe you!!!

I'd like to think that my profit would be more than my subsidies, specially if I wasn't doing any reseeding, building, etc

Milked out

whelan1 wrote: »

yes, i already have money going in there, i also pay premliminary tax every month by dd, i thought this would ease what i have to pay...it nearly killed me each month to pay this as it comes out on 9th of each month- date cant be changed, edited to say we had been using the 3n year averaging and 2009 dropped off, leaving 3 goodish years

Not sure what you can do bout last years bill but it mite be worth getting everything together from this year and into the accountant in November and you could do anything that needs doin before year end to counteract this years tax bill when its due next year. Will try to do this this year as also switched to income averaging, will wait till all stock are housed as I should have more time to do it. This years feed bill has swallowed up every cent of the price increase I reckon, but won't know for sure till everything is done up. Easy to say this now tho

whelan1

Milked out wrote: »

Not sure what you can do bout last years bill but it mite be worth getting everything together from this year and into the accountant in November and you could do anything that needs doin before year end to counteract this years tax bill when its due next year. Will try to do this this year as also switched to income averaging, will wait till all stock are housed as I should have more time to do it. This years feed bill has swallowed up every cent of the price increase I reckon, but won't know for sure till everything is done up. Easy to say this now tho

unfortunately my year ends on sept 30th, but going through the figures income has been decimated for the last 12 months with the bad weather last year and ****e spring

delaval

Relig ,
I was in no way questioning your credibility, I hope your clear on that.

As another poster pointed out is the ac digging deep enough?

rancher

whelan1 wrote: »

unfortunately my year ends on sept 30th, but going through the figures income has been decimated for the last 12 months with the bad weather last year and ****e spring

Income averaging, great fun when your income is increasing, but really hammers you in a bad year

bob charles

no one making money and everyone with big tax bills. :rolleyes:

just do it

reilig wrote: »

What were you saying earlier in the year about a tax saving with a Category a or b tax car registered in or after 2008?

Here you go http://www.boards.ie/vbulletin/showthread.php?p=77477632

Somethings are just easier on the PC (like searching for old threads)

Farmer Pudsey

You can do little about last years tax bill only check if all of the above items from country jimbo are included, one other thing is check if stock at year end can be reduced in value (20 cows reduced in value by 100 euro will reduce tax liable funds by 2K) as this will help with tax bill, check that no checks or bills from last year are left into this year accounts.I am not sure if you can do a PSRA for year 2012 still however this will only defer liability.

This year it is a matter of trying to sort out some depreciation make sure all farm is fenced however if you want to write off a maintenance(current year Tax claim) you cannot claim back vat, the same if you do maintenance in yard or sheds before end of year. Best way longterm is to invest in farm structure shed, handling faculities and depreciate over eight years, Has he adequate small machinery such as fertilizer spreader, topper, roller, sprayer etc. No fear he is one of these idiots pay cash for silage and contracting work to escape VAT. Is the accountant and this man taking the lazy way out and flat rating diesel and on farm expenses. Did he make any charitable donations last year, Medical expenses is another one.

The other thing I think you cannot income average if you have an external source of income.

just do it

reilig wrote: »

No, he has a substantial pension.

Probably nothing much he can do about 2012 return other than talk to accountant. If it's going to be an annual bill he could enter into a payment schedule with revenue in order to reduce his prelimanary tax bill.

He should be thinking about 2013 now. Surely he could invest in the farm. As you rightfully point out it only increases the value of the asset. Roadway, paddocks, drainage to my mind are the best investment you can make if you've heavy land. Being retired he's in a position to practice on-off grazing so investing in these would allow him improve the farm. Between on-off grazing and 1day paddocks he'd get a lot more out of wet fields without poaching the be-j***s out of them.

towzer2010

Farmer Pudsey wrote: »

The other thing I think you cannot income average if you have an external source of income.

I think you can because my accountant started doing it for me last year and I've a paye job as well.

viztopia

Something worth bearing in mind. If you are a single person and have profits of €25, 000 then you will have a tax bill of €5k. I think is is criminal considering thats only €500 per week profit and if you take of the tax then you will only be left with €400 take home per week.

Avoid income averaging like the plague.

Could you employ any of your family to reduce the profits?

KCTK

towzer2010 wrote: »

I think you can because my accountant started doing it for me last year and I've a paye job as well.

Correct, if it's a paye employment and you or your spouse are not a director or 25% owner of the company then you can avail of income averaging.

Not much chance of lowering 2012 tax liability now if all expenses and capital allowances have been correctly calculated, pension contribution is about d only, but if already on a substantial pension does he want to do this. If he thinks he'll have the same problem for 2013 then now time to do something about it, either invest in farm for capital allowances, buy farm vehicle or use one of the few remaining (legal) schemes that you can invest in to reduce your tax liability.

newholland mad

Avoid income averaging like the plague, its great in the good years (when you have the cash anyway) but in a bad year it could break you. Been there done that.

blue5000

I think he could buy next years fert and some meal before the end of this year. He is in reps and that will finish either this year or next year, so at the end of 2014 he could do the same again with the fert and meal, by 2015 reps will be gone and so will his income:o

Midlandsman80

Lads if he has a "substantial" pension and has "made profit" (sfp etc..!!) perhaps he should pay tax...pudsey, you have made the point before that spending money to avoid tax is not always best option...

mf240

Midlandsman80 wrote: »

Lads if he has a "substantial" pension and has "made profit" (sfp etc..!!) perhaps he should pay tax...pudsey, you have made the point before that spending money to avoid tax is not always best option...

I would agree with this if you are only spending for the sole reason of saving tax.

However in this case if he were to discuss with his son that will be taking over eventually what possible improvements are necessary.

Resseesding and drainage over the next few years while he is understocked would be a good move and would set the farm up to carry more stock when the son takes it on.

Same applies to sheds and roadways, fencing, water piping and troughs.

But I would pay the tax before I would buy a jeep or a tractor I didn't need.

Brown Podzol

Agree, not a lot he can do about 2012 now. For 2013 could he delay sale of cattle until Jan 2014 or purchase extra cattle this year and sell in Jan. he can avail of stock relief and this is not clawed back if he reduces stock no's next year.

Zr105

Just on the point of everyone saying go but a jeep or a tractor now to save on 2013, it is important to remember that the man has to pay his tax for 12 now so may not have the funds left to do so. Smaller investments like fencing and that may be attainable but a jeep or tractor is a fair whack of money no matter what age....

reilig

Just on the point of tax for 2012, the original post asked what he could do to save tax in the future. 2012 is gone. He has to pay tax on his profits for 2012. He is looking for ideas for the future!

keep going

One of the best tax investments --lime all claimable in the year you put it out and you skip it the bad year and will probably pay for itself in one year.income averaging is only suitable for places with rising income.

whelan1

is it 15 years of age you can pay a family member, does the op have any grandkids or nephews or nieces they could pay?

lakill Farm

reilig wrote: »

He wants to farm. He just wants to reduce his tax liability.

Limited company

JohnBoy

viztopia wrote: »

Something worth bearing in mind. If you are a single person and have profits of €25, 000 then you will have a tax bill of €5k. I think is is criminal considering thats only €500 per week profit and if you take of the tax then you will only be left with €400 take home per week.

what's criminal about it?

death and taxes, accept them and be happy you're making enough money to have to pay them.


@reillig: if he doesnt have things like fencing, water, drainage reseeding etc he wants to do for the next generation and things are setup fairly well for himself then he's probably as easy to just pay the tax.


@lakill: is a ltd company a good idea for a pensioner?

lakill Farm

JohnBoy wrote: »

@lakill: is a ltd company a good idea for a pensioner?

I know lads in there early 50s on pensions

just do it

The company route isn't with out it's own costs.

lakill Farm

just do it wrote: »

The company route isn't with out it's own costs.

about €300 once off set up

and after that approx. €200 a year more than accounts of a sole trader

just do it

lakill Farm wrote: »

about €300 once off set up

and after that approx. €200 a year more than accounts of a sole trader

I reckon you'll be getting a few PMs

KCTK

For a 12k profit it seems like this man is been given more hassle in trying to avoid paying the tax than is worth it on here. If he really want to minimise his tax then set up a meeting with a tax advisor and get some real practicle options based on what he wishes, on here we are all just guessing on what his exact circumstances re how much his pension is, his age, is he married, does his wife have seperate income, any kids at home, any other relations helping out that could be paid a wage etc

keep going

Has he got any bank shares or the like that have lost value, if he has he could realise the losses and put them against his income.eg if he bought a 1000 shares in aib at 10e that would be 10000.if he sold them at 10 cent they would be worth 100e 1therefore he would have losses of 9900e which he could set against his income.if he was worried about them shares bouncing back he should buy them back straight away and he would benifit from any bounce.if the shares did increase in value he could sell them after he had transfered the bissiness when he had less income to declare for tax

KCTK

keep going wrote: »

Has he got any bank shares or the like that have lost value, if he has he could realise the losses and put them against his income.eg if he bought a 1000 shares in aib at 10e that would be 10000.if he sold them at 10 cent they would be worth 100e 1therefore he would have losses of 9900e which he could set against his income.if he was worried about them shares bouncing back he should buy them back straight away and he would benifit from any bounce.if the shares did increase in value he could sell them after he had transfered the bissiness when he had less income to declare for tax

Afraid that won't work, you can not use a cgt loss against case I or II profits, that loss can only be set against future capital profits from sale of non development land.

keep going

KCTK wrote: »

Afraid that won't work, you can not use a cgt loss against case I or II profits, that loss can only be set against future capital profits from sale of non development land.

Ok it was worth atry

KCTK

keep going wrote: »

Ok it was worth atry

Oh believe me every idea is worth throwing out there when trying to reduce the tax you pay, if you come up with enough ideas eventually one might just work!!!!