The agriculture sector is the oldest and largest exporting sector in Ireland and it represents a fundamental driver of economic activity and employment in rural Ireland. The Department of Agriculture Food & Marine (‘DAFM’) reported in their 2023 Annual Review & Outlook that in 2022, the sector employed 164,900 people, representing 6.5% of the total workforce across 135,000 farms, 2,000 fishing vessels & aquaculture sites and some 2,000 food production and drink enterprises. The sector produces 9% of Ireland’s exports each year.
These figures were reported in the face of continued volatile markets caused by multiple shocks in recent years, including the COVID-19 pandemic and the war in Ukraine. In spite of such difficulties, the sector has demonstrated its resilience, with exports and employment in the sector supporting a balanced regional economy. However, inflationary pressures, geopolitical uncertainty and depressed output prices have called into question the viability of some farm operations and this uncertainty is making it increasingly difficult to attract new entrants into the sector.
Earlier this year, Teagasc, the state agency responsible for providing research, advisory and education in agriculture, horticulture, food and rural development, released the findings of their National Farm Survey for 2023 which is representative of almost 85,000 farms in Ireland. The survey confirmed that average family farm income in 2023 was less than €20,000 (a reduction of 57% versus the prior year), the lowest it has been in more than a decade. This downward trajectory in income levels is very concerning and support from Government is required.
The DAFM’ budget allocation was reduced by 10.3% in 2024 to €1.94bn. The public finances are currently in a strong position.The release of the Summer Economic Statement has indicated a Budget 2025 package of €8.3 billion, higher than anticipated. A further reduction in the DAFM budget allocation would represent a blow to an already struggling sector. As this is the final budget before the next general election, Budget 2025 will provide Government with an opportunity to introduce tangible measures to support a vital agricultural sector. We consider a number of factors below and how the Government can address these in the Budget.
Extension to Stock Relief Measures
Stock relief is available as a tax deduction, for increases in stock values, to any person carrying on the trade of farming, the profits from which are chargeable to tax under Case I of Schedule D. The relief is due to expire at the end of 2024. We expect that the Minister will extend this very important relief
Residential Zoned Land Tax
The Residential Zoned Land Tax (RZLT) was introduced in Budget 2022 as part of the Government’s 'Housing for All - a New Housing Plan for Ireland'. RZLT is intended to act as a stimulus to encourage residential development on certain land that is zoned for residential use and serviced. RZLT is an annual tax and is calculated at 3% of the market value of land within its scope. Finance (No.2) Act 2023 provided that the first liability date for RZLT is deferred until February 2025.
The motive behind the introduction of RZLT was well meaning, however, it is possible that land which forms an integral part of existing farm operations, including food production, where the zoned residential status of the land was provided without any consent, action or intent of the part of the land owner, can fall within the remit of the tax. In many cases, the 3% annual tax on land which is actively farmed may be disproportionate with the revenue generating capacity of that land, therefore, consideration must be given to introduce measures to help identify genuinely farmed land in order to remove it from the scope of RZLT.
Climate Action
According to the Environmental Protection Agency the agriculture sector was directly responsible for 37.8% of national Greenhouse Gases emissions in 2023. Climate change is challenging for Irish agriculture both in the context of greenhouse gas emissions and the need for adaptation of farming practices to be more resilient to the impacts of climate change. However, inflationary pressures and depleted income levels will make it increasingly difficult for many farmers to engage with initiatives to tackle climate change.
Ireland has committed to reducing its overall greenhouse gas emissions by 51% (versus 2018) by 2030 and achieve climate neutrality by 2050. The target for agriculture is a 25% reduction. A recent publication of the EPA’s Provisional Greenhouse Gas Emissions for 2023 confirmed that emissions from Agriculture decreased by 4.6% in 2023. Such positive figures show that agriculture is on the right path, however, considerable efforts will be required to meet the overall reduction of 25% by 2030.
There are a number of measures that, if introduced, we believe could assist Irish farmers in incorporating emissions reducing technologies into their farming practices. For example, accelerated capital allowances should be available for farm equipment which contributes to increased emission efficiency. Consideration should be given to whether additional supports should be provided to encourage farmers to embrace the green energy agenda, such as wind and solar.
Capital Acquisitions Tax - Agricultural Relief
Renewable electricity plays a crucial role in Ireland’s efforts to combat climate change. It is clear that the Agricultural Sector can play an important role in Ireland meeting its renewable energy targets through the use of on-land wind farms or solar energy projects.
Farmers are currently deterred from diversifying into wind energy, as it may have significant negative tax consequences at the point of passing their farm to the next generation. Currently, the land upon which the wind turbines stand is deemed to be commercial, thereby, ruling out any entitlement to claim CAT Agricultural Relief on the passing of a windfarm by way of gift or inheritance. Consideration should be given to extending the scope of Agricultural Relief to include the land upon which the turbines stand.
It is currently possible for land used or leased for the installation of solar panels to be classified as qualifying agricultural property for CAT Agricultural Relief, under certain conditions. A key condition is that the total area of land used or under lease and on which solar panels are installed does not exceed 50% of the total area of agricultural land comprised in the gift or inheritance. Consideration should be given to either abolishing this condition, or, potentially increasing the portion of land on which solar panels can be installed beyond 50%. Such a move would greatly encourage the introduction of solar energy projects on agricultural land.
Over the next few weeks in the lead up to Budget 2025 #RBKtax will look at potential tax measures that the Government could consider and provide insights into Budget 2025.
Budget Briefing Hybrid Event
RBK will be holding its annual Breakfast Budget Briefing as a hybrid event in person at the Athlone Springs Hotel in Athlone and streaming live online on Wednesday, 2nd October. Mike Scanlan, Tax Director, RBK will be analysing the tax measures announced in Budget 2025 and David McNamara, Chief Economist with AIB will look at the economic outlook.
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Contact Us
For more advice and support or to discuss personal taxes, please contact a member of the RBK Tax Team:
John Doherty - Tax Manager - (090) 6480 600
