Tax planning for farmers

What is stock relief for farmers?

Stock relief is a deduction from farm profits based on the increase in the value of your trading stock over the year. The standard rate is 25% of the increase. Partners in a registered farm partnership get 50%, and young trained farmers get 100%, subject to limits. Both standard and enhanced stock relief apply to accounting periods ending on or before 31 December 2027.

How does income averaging work?

Income averaging lets you pay tax on one-fifth of your farming profits and losses over five years, which smooths out good and bad years. Once in, you stay in for at least five years. You can step out for a single year and pay tax on that year's actual profit, deferring the tax on the average, which helps after a poor year.

How are farm grants treated for tax?

Capital allowances are given only on what you actually paid, after any grant. Farm buildings, yards, fences, drains and similar works qualify for farm buildings allowances of 15% a year for six years and 10% in the seventh. Machinery is plant, at 12.5% a year over eight years.

Under TAMS 3 most schemes pay 40% of eligible costs, and the Young Farmers, Women Farmers, Farm Safety, Solar and Organic schemes pay 60%, generally on investments up to €90,000 for an individual (€160,000 for a registered partnership).

How do I pass on the farm with the least tax?

Starting early avoids both family disagreements and avoidable tax. The main reliefs on a transfer to a child are:

• Agricultural Relief (CAT): cuts the taxable value of farm property by 90%. The child must pass an asset test (80% of their assets agricultural after the gift) and an active farmer test: farming, or leasing to someone who farms, for six years, with a trained farmer qualification or 50% of working time spent farming.
• Retirement Relief (CGT): for a parent aged 55 or over, relief on transfers to a child up to €10 million if aged 55 to 69, or €3 million from 70.
• Stamp Duty: consanguinity relief, a 1% rate on transfers of farmland between relatives executed by 31 December 2028, and young trained farmer relief for farmers under 35, subject to conditions.
• Farm restructuring relief (CGT): for selling and buying, or swapping, land to bring the farm closer together, with a Teagasc certificate. The first sale or purchase must be made by 31 December 2029.

Do farmers have to register for VAT?

Not if you only produce agricultural goods. Unregistered farmers are flat-rate farmers: when selling to VAT-registered businesses such as co-ops and meat factories you add the flat-rate addition, 4.5% from 1 January 2026, to compensate you for VAT on your costs. A farmer who also supplies agricultural services, such as contracting, must register once those services pass the VAT threshold.