Revenue Note for Guidance

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Revenue Note for Guidance

659 Farming: allowances for capital expenditure on the construction of farm buildings, etc for control of pollution

Summary

The scheme applies in respect of expenditure incurred between 6 April 1997 and 31 December 2010. For expenditure incurred before 6 April 1998 a special year 1 allowance of the lesser of 50 per cent of expenditure incurred or €12,700 is provided for. For expenditure incurred on or after 6 April 1998 but before 6 April 2000 the 1 year allowance is the lesser of 50% of expenditure incurred or €19,050. In both cases the balance of the expenditure is written off over 7 years at the rate of 15% for each of 6 years with 10% in the final year.

As regards expenditure incurred between 6 April 2000 and 31 December 2004 the allowances are given over 7 years, 15% for each of the first 6 years and 10% in the final year. A person may elect, however, for the following approach:

  • an allowance (known as the “residual amount”) equal to the lesser of 50% of expenditure or €31,750 can be taken in whole or in part at any time over the 7 year writing-down period. The balance of the allowance is spread over the 7 years at the rate of 15% for each of 6 years with 10% in the final year.

As regards expenditure incurred on or after 1 January 2005 the allowances are given over 3 years in equal amounts. A person may elect for the following approach:

  • an allowance (residual amount) equal to the lesser of 50% of expenditure or €50,000 (€31,750 for capital expenditure incurred prior to 1 January 2006) can be taken in whole or in part at any time over the 3 years writing-down period. The balance of the allowance is spread over the 3 years at the rate of 33⅓% for each of the 3 years.

The aggregate of allowances available in any one year cannot exceed the “residual amount” and once the election is made it cannot be altered during the writing-down period.

To qualify for any of the schemes, a farmer must have a farm nutrient management plan in place which is drawn up by an agency or planner approved by the Department of Agriculture and Food.

Details

Application

(1) The section applies to a person who —

  • is engaged in farming,
  • has a farm nutrient management plan drawn up in respect of his/her farm by an agency or planner approved by the Department of Agriculture and Food, and
  • incurs capital expenditure between 6 April 1997 and 31 December 2010 on buildings or structures of the type listed in the Table to the section.

The farm nutrient management plan must accord with either guidelines issued by the Department of Agriculture, Food and Forestry (currently Agriculture and Food), or a Rural Environment Protection Scheme (REPS) or Erne Catchment Nutrient Management Scheme plan. The buildings or structures must be constructed in accordance with the farm nutrient management plan and must be certified as being necessary for the control of pollution by the agency or planner who drew up the plan.

Allowances

(2)(a) Before any expenditure is incurred, a farmer must deliver a copy of his/her farm nutrient management plan to the Department of Agriculture and Food. Subject to Article 6 of Council Regulation (EEC) No. 2328/91 of 15 July 1991 a farmer is then entitled to the allowances (known as “farm pollution control allowances”) in respect of that capital expenditure incurred.

(2)(b) The writing-down periods over which the “farm pollution control allowances” are given are as follows:

  • 8 years where the expenditure was incurred before 6 April 2000,
  • 7 years where the expenditure was incurred on or after 6 April 2000 and before 1 January 2005,
  • 3 years where the expenditure was incurred on or after 1 January 2005.

The rate at which the allowances are to be given are set out in subsections (3), (3A) and (3AA).

(3) Where the expenditure was incurred prior to 6 April 2000 the rates at which the allowances are given are as follows:

  • for expenditure incurred before 6 April 1998 the first year allowance is set at the lesser of €12,700 or 50% of the expenditure with the balance being set off over the next 6 years at the rate of 15% per annum with the remaining 10% of the balance in the final year (year 8),
  • for expenditure incurred on or after 6 April 1998 but before 6 April 2000 the first year allowance is set at the lesser of €19,050 or 50% of the expenditure with the balance being set off over the next 6 years at the rate of 15% per annum with the remaining 10% of the balance in the final year (year 8).

(3A) Where expenditure was incurred between 6 April 2000 and 31 December 2004 the allowances are given at the rate of 15% of the expenditure in each of the first 6 years with the final 10% in year 7.

(3AA) Where expenditure was incurred on or after 1 January 2005 the allowances are given at the rate of 33⅓% in each of the 3 years.

(3B) A person who incurs expenditure and who is entitled to the allowances provided for in subsection (3A) may elect to have the allowances available in the following manner:

  • the writing-down period remains at 7 years,
  • the person may specify an amount of allowances to be available in any or all years. This amount (known as the “residual amount”) in aggregate is limited to the lesser of 50% of the expenditure incurred or €31,750,
  • the balance of the allowances (known as the “specified amount”) is available over 7 years at the rate of 15% of the “specified amount” for each of 6 years with 10% of the “specified amount” available in year 7,
  • the amount of allowances available in any one year may not exceed the “residual amount”.

(3BA) A person who incurs expenditure and who is entitled to the allowances provided for in subsection (3AA) may elect to have the allowances available in the following manner:

  • the writing-down period remains at 3 years,
  • the person may specify an amount of allowances to be available in any or all years. This amount (“residual amount”) in aggregate is limited to the lesser of 50% of the expenditure incurred or €50,000 (€31,750 for capital expenditure incurred prior to 1 January 2006),
  • the amount of allowances available in any one year may not exceed the “residual amount”.

(3C)(a) The election to opt for the allowances provided for in subsection (3B) or subsection (3BA) must be made on or before the specified return date for the chargeable period in which the expenditure was incurred.

(3C)(b) Once the election is made, it cannot be altered or varied during the writing-down period to which it refers.

(4) For the purposes of these allowances, the “basis period” for income tax purposes is the period on the profits or gains of which the income tax liability is calculated.

Claims

(5) A claim for the farm pollution control allowance is to be included in the farmer’s annual tax return. The balance of the allowances not granted in any year of assessment (because of an insufficiency of profits to absorb them) may be carried forward to later years.

(6) A claim for a farm pollution control allowance is made to, and determined by, the taxpayer’s inspector. If a claimant is dissatisfied with the inspector’s determination, an appeal may be made to the Appeal Commissioners.

(7) The Appeal Commissioners deal with such an appeal as if it were an appeal against a tax assessment. The provisions of the Income Tax Acts covering rehearing by the Circuit Court and a statement of a case for the opinion of the High Court on a point of law also apply.

Transfers of farms

(8) If a person who is entitled to a farm pollution control allowance transfers the farm to another person, the transferee becomes entitled to whatever balance of allowance is available for chargeable periods after the transfer.

(9) If only part of the farm is transferred, the transferee may claim so much of the allowance as relates to that part of the land.

Apportionment of expenditure, prevention of double relief and exclusion of grants

(10) Capital expenditure that relates only partly to farming pollution control purposes is to be apportioned. Farm pollution control allowances only apply to the part that relates to pollution control.

(11) A farm pollution control allowance is not granted if the expenditure qualifies for an industrial building initial or writing-down allowance under Chapter 1 of Part 9 or a wear and tear allowance under Chapter 2 of Part 9 or a farm buildings allowance under section 658.

(12) Net expenditure only qualifies for farm pollution control allowances – any State or other subsidy is excluded.

Qualifying expenditure

(13) Only expenditure attributable to building work actually carried out in the period 6 April 1997 to 31 December 2010 will benefit from the farm pollution control allowance.

Relevant Date: Finance Act 2021