Tax in Farming

Earnshaw · 08-09-2020 9:51am #1

A friend has a full time job paying 50k and a farm enterprise which this year will have 50k left in the account at the end of the year.

I told them about depreciation of assets but what are their other options to avoid paying 21k tax on this profit (50k x 42%)?

Mooooo · 08-09-2020 10:00am

Tell him to talk to an accountant. If he still has capital allowances to take that 50k isn't profit

893bet · 08-09-2020 10:54am

Any close family member that do work and can be given a wage?

E.g wife or teenage children

longgonesilver · 08-09-2020 11:16am

Is this his normal level of profits or is there exceptional circumstances this year?

Earnshaw · 08-09-2020 11:23am

Mooooo wrote: »

Tell him to talk to an accountant. If he still has capital allowances to take that 50k isn't profit

There will be 50k left over. Can you explain capital allowances?

Earnshaw · 08-09-2020 11:25am

longgonesilver wrote: »

Is this his normal level of profits or is there exceptional circumstances this year?

Not normal. Extra cash is from decreasing stock numbers.

Earnshaw · 08-09-2020 11:26am

893bet wrote: »

Any close family member that do work and can be given a wage?

E.g wife or teenage children

Can the family member be paid a lump sum or do payments need to shown coming out over the year?

Mooooo · 08-09-2020 11:34am

Earnshaw wrote: »

There will be 50k left over. Can you explain capital allowances?

Capital allowances are writing off any machinery building etc over a period of time. If it's reduced stock he'll have he'll also have lower closing stock as opposed to opening stock. He should really talk to an accountant, the accountant may save a lot more than what they'll cost

KAMG · 08-09-2020 12:14pm

Mooooo wrote: »

Capital allowances are writing off any machinery building etc over a period of time. If it's reduced stock he'll have he'll also have lower closing stock as opposed to opening stock. He should really talk to an accountant, the accountant may save a lot more than what they'll cost

They should really talk to an accountant. They should probably have had an accountant doing the accounts and tax every year for them before this too. God knows what sort of returns were going in to Revenue!

dzer2 · 08-09-2020 12:40pm

Should really talk to an advisor but won't be profit as stock is lower so it will be sorted in balance sheet but should looks at forward buying or pension

realtec · 08-09-2020 2:28pm

what type of farm enterprise is your friend involved in exactly?

893bet · 08-09-2020 3:20pm

Earnshaw wrote: »

Can the family member be paid a lump sum or do payments need to shown coming out over the year?

Needs to be real time. So make a payment each month for the next 4.

Need to be aware of their earnings. If your wife works externally also is on the higher tax bracket then she will pay half in tax and there is no point to the exercise.

wrangler · 08-09-2020 3:39pm

Earnshaw wrote: »

A friend has a full time job paying 50k and a farm enterprise which this year will have 50k left in the account at the end of the year.

I told them about depreciation of assets but what are their other options to avoid paying 21k tax on this profit (50k x 42%)?

In come tax on a farm is never as much as you think, get an accountant, even if they don't save you much it's more rewarding than paying tax in this country.
My accountant has saved me (hundreds of ) thousands

duffysfarm · 08-09-2020 4:20pm

if the extra cash in your bank account is due to stock been sold and you have less stock than last year then that necessarily doesn't mean you will be taxed on the €50k. you are not taxed on cash in bank but on profits in a year. if the stock were properly valued in the last set of accounts then you will only be taxed on the increase in value of these stock in the year.

to be honest there are not many farms making €50k profit in a year unless you are in dairy or farming on a large enough scale. if your friend is working full time earning €50k then its hard to see how he could be earning another €50k a year part time farming.

as other posters have said, get an accountant or at least speak to one.

J.O. Farmer · 08-09-2020 7:34pm

893bet wrote: »

Needs to be real time. So make a payment each month for the next 4.

Need to be aware of their earnings. If your wife works externally also is on the higher tax bracket then she will pay half in tax and there is no point to the exercise.

Paying your wife might be of limited value if she works at all. Isn't joint assessment normally most beneficial for married couples.

Dickie10 · 08-09-2020 9:20pm

someone dairying might be earning that, may have a farm manager while they work the day job.

Earnshaw · 09-09-2020 8:28pm

Are there things he could purchase in order to decrease the amount of taxable money left over before the end of year?

memorystick · 19-10-2020 10:56am

Just finished the accounts last night and I made a massive 9k from 70+ acres last year! What a waste of time. Am I the only 1?

19-10-2020 11:16am

memorystick wrote: »

Just finished the accounts last night and I made a massive 9k from 70+ acres last year! What a waste of time. Am I the only 1?

Maybe I'm mad but 9k extra in clean profit is not bad when added to an off farm income. If you are paying tax at the higher rate in your off-farm job you would need an 18k pay rise to get 9k more.

Breaking even is about all we do most years (including the SFP).

wrangler · 19-10-2020 11:18am

memorystick wrote: »

Just finished the accounts last night and I made a massive 9k from 70+ acres last year! What a waste of time. Am I the only 1?

Is that including SFP, Farmers need to concentrate on schemes now for income, This talk of getting profit from the market is BS
I got a letter from Inland revenue this morning with reports going back to 2014.... like WTF. I hate to think of them sniffing around, My aim of wasting money rather than paying tax must be making them suspicious, The tax free lease must be annoying the hell outa them.

The joke is they owe me money now after all their messing, I have to say it's only a nominal amount they owe me, my accountant must be on the ball

duffysfarm · 19-10-2020 12:10pm

can you do my tax return for me?

memorystick wrote: »

Just finished the accounts last night and I made a massive 9k from 70+ acres last year! What a waste of time. Am I the only 1?

patsy_mccabe · 19-10-2020 12:42pm

As said above - Don't make the classic mistake of thinking you pay tax on cash in your farm account.
You only have to pay tax on profit. Your accountant can account for different numbers of stock (cattle) from year to year tru opening and closing stock values. Also don't buy machinery you don't need to just keep down tax. You can spend the money on things that will make you money or make life less stressful like- better fencing, lime, handling facilities etc etc

jfh · 19-10-2020 12:59pm

patsy_mccabe wrote: »

As said above - Don't make the classic mistake of thinking you pay tax on cash in your farm account.
You only have to pay tax on profit. Your accountant can account for different numbers of stock (cattle) from year to year tru opening and closing stock values. Also don't buy machinery you don't need to just keep down tax. You can spend the money on things that will make you money or make life less stressful like- better fencing, lime, handling facilities etc etc

Just picking up on lime, I get that it's beneficial but from a tax perspective, you can't do much with it?

Earnshaw · 19-10-2020 1:28pm

memorystick wrote: »

Just finished the accounts last night and I made a massive 9k from 70+ acres last year! What a waste of time. Am I the only 1?

Depends how many hours ur putting in - but if it's around 20/week then 9k after tax is OK?

Cavanjack · 19-10-2020 2:19pm

Maren Creamy Tattoo wrote: »

Maybe I'm mad but 9k extra in clean profit is not bad when added to an off farm income. If you are paying tax at the higher rate in your off-farm job you would need an 18k pay rise to get 9k more.

Breaking even is about all we do most years (including the SFP).

Think about all the household items you are after paying for through the farm. Phone bills, Esb, heat, a percentage of running a car maybe, pension etc. Work that out and see how much it would cost if paying it with money from a paye job. You’ll find you didn’t do too bad.

patsy_mccabe · 19-10-2020 2:37pm

jfh wrote: »

Just picking up on lime, I get that it's beneficial but from a tax perspective, you can't do much with it?

Not in the sense of a writeoff over a number of years.
But for every 1000 Euro you spend on lime, you pay 500€ less tax. That lime will then go on to give returns in years to come in better land, better cattle etc.

At 2 tonne per acre, it works out at only €25 per acre spread. A good investment in my book.

19-10-2020 2:39pm

Cavanjack wrote: »

Think about all the household items you are after paying for through the farm. Phone bills, Esb, heat, a percentage of running a car maybe, pension etc. Work that out and see how much it would cost if paying it with money from a paye job. You’ll find you didn’t do too bad.

Yes I was going to point out there is hidden savings of course but I hadn't time when I posted to go into more detail.

One thing I am getting conflicting feedback on long term off-setting of farm tax costs against the off farm income tax. i.e. farm not making enough profit to get the benefits of all the tax write offs so putting against off farm income instead.

Ive been told I can only write off for the first few years and then you have to keep them separate but I don't see why it can't always be done.

Dinzee Conlee · 19-10-2020 2:58pm

Maren Creamy Tattoo wrote: »

Yes I was going to point out there is hidden savings of course but I hadn't time when I posted to go into more detail.

One thing I am getting conflicting feedback on long term off-setting of farm tax costs against the off farm income tax. i.e. farm not making enough profit to get the benefits of all the tax write offs so putting against off farm income instead.

Ive been told I can only write off for the first few years and then you have to keep them separate but I don't see why it can't always be done.

My tax returns are always a combination of farm + off-farm

The farm must be run as a commercial operation. Meaning the aim is to make a profit. I dont think its a revenue definition - but I heard you would want to be making a profit at least 1 in 3 years to avoid bring too much attention to yourself...

20-10-2020 7:11pm

Dinzee Conlee wrote: »

My tax returns are always a combination of farm + off-farm

The farm must be run as a commercial operation. Meaning the aim is to make a profit. I dont think its a revenue definition - but I heard you would want to be making a profit at least 1 in 3 years to avoid bring too much attention to yourself...

Our farm basically never makes a profit everything has been pumped back into it incl the SFP for many years building sheds, buying machines, improving the yard etc. I remember when my father took over first he was getting thousands back in tax for the first few years (all tax he was paying off farm). Then his accountant said he had to stop using his off farm tax.

I’m starting out now and want to maximise the tax savings against my off farm income but it’s a pain if I can’t keep writing off stuff against tax paid off farm as there likely won’t be enough farm income to fully use up all the tax write offs possible.

Dinzee Conlee · 20-10-2020 7:40pm

Maren Creamy Tattoo wrote: »

Our farm basically never makes a profit everything has been pumped back into it incl the SFP for many years building sheds, buying machines, improving the yard etc. I remember when my father took over first he was getting thousands back in tax for the first few years (all tax he was paying off farm). Then his accountant said he had to stop using his off farm tax.

I’m starting out now and want to maximise the tax savings against my off farm income but it’s a pain if I can’t keep writing off stuff against tax paid off farm as there likely won’t be enough farm income to fully use up all the tax write offs possible.

Work with your accountant, tell them your plans and ask them what’s the best way to go about it...

it it might be more tax efficient to invest at a more sustainable rate? Or maybe only invest heavily every second year?

Edit - I would have said you should have a fair whack of capital allowances build now? Might be worth chatting that through with the accountant as well?

Sugarbowl · 20-10-2020 9:01pm

Without going off topic, what happens when you get the pension and still farming? Is it taxable? Does the accountant include it as wages similar to an off farm job in the books?

Grueller · 20-10-2020 9:05pm

Sugarbowl wrote: »

Without going off topic, what happens when you get the pension and still farming? Is it taxable? Does the accountant include it as wages similar to an off farm job in the books?

You are entitled to earn €18,000 tax free as pensioner. Any thing over that is taxable regardless of where you earn it, be that pension, farm or other income.
If you are a married couple over pension age that is €36,000 combined tax free.

whelan2 · 22-10-2020 7:41am

Is there an extension to the pay and file deadline this year?

duffysfarm · 22-10-2020 8:25am

10 December

whelan2 wrote: »

Is there an extension to the pay and file deadline this year?

wrangler · 22-10-2020 10:26am

Grueller wrote: »

You are entitled to earn €18,000 tax free as pensioner. Any thing over that is taxable regardless of where you earn it, be that pension, farm or other income.
If you are a married couple over pension age that is €36,000 combined tax free.

Just realised that since all the corresondence from Inland Revenue over the last few days, Unreal concession for oldies now with that and up to €80000 tax free on leases

duffysfarm · 22-10-2020 10:32am

sorry - when you say inland revenue do you mean HMRC or the Revenue Commissioner?

wrangler wrote: »

Just realised that since all the corresondence from Inland Revenue over the last few days, Unreal concession for oldies now with that and up to €80000 tax free on leases

893bet · 22-10-2020 10:44am

wrangler wrote: »

Just realised that since all the corresondence from Inland Revenue over the last few days, Unreal concession for oldies now with that and up to €80000 tax free on leases

Is that not the same as for anyone under 65 also? Have the same tax free allowance and can lease tax free?

ml100 · 22-10-2020 11:01am

Maren Creamy Tattoo wrote: »

Our farm basically never makes a profit everything has been pumped back into it incl the SFP for many years building sheds, buying machines, improving the yard etc. I remember when my father took over first he was getting thousands back in tax for the first few years (all tax he was paying off farm). Then his accountant said he had to stop using his off farm tax.

I’m starting out now and want to maximise the tax savings against my off farm income but it’s a pain if I can’t keep writing off stuff against tax paid off farm as there likely won’t be enough farm income to fully use up all the tax write offs possible.

The profit you have to make every x years is profit before capital depreciation, you may be making a profile before you write off the shed/machinery costs etc

Earnshaw · 22-10-2020 11:21am

Well if profits are on the high side can't farm shed "repairs" be done as they can be written off over 1 year instead of (whatever amount of years it is) for buildings and (8years or whatever amount of years it is) for machinery?

Tonynewholland · 22-10-2020 11:24am

Earnshaw wrote: »

Well if profits are on the high side can't farm shed "repairs" be done as they can be written off over 1 year instead of 15 for buildings and 8 years for machinery?

I’ve never heard of 15 years

jaymla627 · 22-10-2020 11:32am

Earnshaw wrote: »

Well if profits are on the high side can't farm shed "repairs" be done as they can be written off over 1 year instead of (whatever amount of years it is) for buildings and (8years or whatever amount of years it is) for machinery?

Yeah pretty above-board, but vat cant be claimed back on the cladding steel etc on "repairs"

22-10-2020 1:44pm

jaymla627 wrote: »

Yeah pretty above-board, but vat cant be claimed back on the cladding steel etc on "repairs"

Does anyone ever check this? Never mind farm "repairs " going against VAY I've even heard of lads putting in stuff they are buying for a house build etc as a farm VAT reclaim.

Earnshaw · 22-10-2020 2:02pm

Maren Creamy Tattoo wrote: »

Does anyone ever check this? Never mind farm "repairs " going against VAY I've even heard of lads putting in stuff they are buying for a house build etc as a farm VAT reclaim.

Can you both write off the "repairs" as a capital expense AND claim the VAT at a later date?

Pinsnbushings · 22-10-2020 5:53pm

Earnshaw wrote: »

Can you both write off the "repairs" as a capital expense AND claim the VAT at a later date?

No as I see it repairs are not treated as a capital excpense,
they are a cost like meal or fert, 100 percent of the repair cost is taken off your profit in that year.. Vat can't be reclaimed.

Earnshaw · 22-10-2020 8:01pm

Pinsnbushings wrote: »

No as I see it repairs are not treated as a capital excpense,
they are a cost like meal or fert, 100 percent of the repair cost is taken off your profit in that year.. Vat can't be reclaimed.

Farm Buildings Repairs are a capital expense.

The question is can repairs be used as a capital expense whilst also reclaiming the VAT on them at a later point in time.

Dinzee Conlee · 22-10-2020 8:46pm

Earnshaw wrote: »

Farm Buildings Repairs are a capital expense.

The question is can repairs be used as a capital expense whilst also reclaiming the VAT on them at a later point in time.

I think the VAT form states that VAT can’t be reclaimed on repairs...

See page 2
https://www.revenue.ie/en/vat/documents/form-vat58.pdf

893bet · 22-10-2020 8:57pm

Earnshaw wrote: »

Farm Buildings Repairs are a capital expense.

The question is can repairs be used as a capital expense whilst also reclaiming the VAT on them at a later point in time.

Repairs are not a capaital expense usually. Maybe the full reroofing of a shed could be classified as a capital investment but the average repair is not as far as I have been informed by my accountant.

ruwithme · 22-10-2020 9:02pm

I suppose accountants differ and some lads pay professional fees,and a bit of tax.

Pinsnbushings · 22-10-2020 9:11pm

Earnshaw wrote: »

Farm Buildings Repairs are a capital expense.

The question is can repairs be used as a capital expense whilst also reclaiming the VAT on them at a later point in time.

No cant claim vat. What i meant was farm building repairs aren't treated the same as a capital expense such as a new farm building, machinery etc. in tax terms, which are written off over a number of years. The repair is written off in 1 year.

28-10-2020 8:56pm

Gracelynn Obnoxious Body wrote: »

Does anyone ever check this? Never mind farm "repairs " going against VAY I've even heard of lads putting in stuff they are buying for a house build etc as a farm VAT reclaim.

I’ve come across a fair few of your posts giving tax and accountancy advice to fellow farmers. I think the mods seriously need to add a note to your signature advising posters to ignore your advice as you generally advise tax evasion (not avoidance).

Over the last few months you have admitted;
- claiming back VAT back on buildings which is grand but then not telling your accountant which means you are over claiming for expenses in your tax return
- advising people to claim all their diesel expenses from a very long commute, revenue are not stupid that will stick out like a sore thumb. Also saw you advise people to claim diesel from wife’s car which has nothing to do with farm.
- mentioned claiming household electricity bills (fine to claim a small bit but stupid otherwise)
- you are now talking about sneaking in a private house build into your farm expenses. I’ve seen you reference that you are building your own house!!!!!
- in this thread you mention your farm doesn’t make a profit because “ keep writing off stuff against tax paid off farm”. Revenue are not fools they have sophisticated software that can benchmark your farms profit and expenses at expense roll up level (eg motor exps) against your peers. You give them all the information they need via the detailed form 11 tax return.

Some day your farm may be audited by the revenue and from reading on how you run your farm you are going to be rode in back taxes and penalties (which usually equal 100% of the taxes you evaded do 2x)

Above post seems stalkish but I keep coming across dodgy tax advice and in most cases your name is against it

Just to clarity, pretty much all self employed people will sneak in the odd private invoice, I do too but you take the micky. Good luck to Gracelynn Obnoxious Body trying to claim vat58 / income tax deduction on their private house build

Dunedin · 28-10-2020 9:07pm

Mayo_fan wrote: »

I’ve come across a fair few of your posts giving tax and accountancy advice to fellow farmers. I think the mods seriously need to add a note to your signature advising posters to ignore your advice as you generally advise tax evasion (not avoidance).

Over the last few months you have admitted;
- claiming back VAT back on buildings which is grand but then not telling your accountant which means you are over claiming for expenses in your tax return
- advising people to claim all their diesel expenses from a very long commute, revenue are not stupid that will stick out like a sore thumb. Also saw you advise people to claim diesel from wife’s car which has nothing to do with farm.
- mentioned claiming household electricity bills (fine to claim a small bit but stupid otherwise)
- you are now talking about sneaking in a private house build into your farm expenses. I’ve seen you reference that you are building your own house!!!!!
- in this thread you mention your farm doesn’t make a profit because “ keep writing off stuff against tax paid off farm”. Revenue are not fools they have sophisticated software that can benchmark your farms profit against your peers. You give them all the information they need via the detailed form 11 tax return.

Some day your farm may be audited by the revenue and from reading on how you run your farm you are going to be rode in back taxes and penalties (which usually equal 100% of the taxes you evaded do 2x)

Above post seems stalkish but I keep seeing dodgy advice and in most cases your name is against it

Just to clarity, pretty much all self employed people will sneak in the odd private invoice, I do too but you take the micky. Good luck trying to claim vat58 / income tax deduction on your private house build

And that’s only the stuff they admitted.......

Tax in Farming

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