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Tax & Tax Planning

Tax & Tax Planning. Presentation – 24 June 2011 Clonakilty Agricultural College. Background. Introduction . Kieran Coughlan Attended Darrara in 1999/00 – completed Certificate in Agriculture First Class Honours degree in Accounting in UCC 2001 – 2004

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Tax & Tax Planning

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  1. Tax & Tax Planning Presentation – 24 June 2011 Clonakilty Agricultural College Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  2. Background Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  3. Introduction • Kieran Coughlan • Attended Darrara in 1999/00 – completed Certificate in Agriculture • First Class Honours degree in Accounting in UCC 2001 – 2004 • Completed Professional Accounting exams in 2007 and Professional Tax Exams in 2008 – national prizewinner • Registered Tax Consultant – operating all over Cork, specialising in Farming Tax • Weekly articles in Farming section of the Irish Examiner (every Thursday) • ICMSA Tax Committee Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  4. What’s is all about Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  5. What’s is all about Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  6. What’s is all about TAX Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  7. What’s is all about Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  8. Key message “Work smarter, not harder" Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  9. Questionaire • Please complete your questionaire! Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  10. How Tax Works! • Sales milk €120,000 • Sales cows €20,000 • Total Sales €140,000 • Expenditure -Fertiliser (€20,000) -Feed (€25,000) - Personal expenses (€20,000) - Purchase Tractor (€40,000) Total expenditure (€105,000) Cash position +€35,000 Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  11. How Tax Works! Cash position does not equal tax position! Farm sales €140,000 Farm day to day purchases (€45,000) Accounting Profits €95,000 Less 1/8th allowance for machinery (€5,000) Taxable profits €90,000 Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  12. How Tax Works! Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  13. 2 heads are better than one even if its cabbage! Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  14. Tax savings by splitting income! Tax saving = €9,219 Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  15. Involving family members in farm • Tax efficient method of splitting income amongst family • Benefit from tax band and exemption limits for PRSI, USC and Income Tax • Particularly useful at retirement or starting off Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  16. Saving Tax • Short term tax planning: • Income averaging • Stock relief for young trained farmers and others • Reclaiming VAT for unregistered farmers • HP, Leasing and Capital Allowance options • Renting and leasing of land • Involving family members in the business • Long Term Tax Planning: • Retirement planning • Passing farms on to the next generation (stamp duty, capital gains tax, inheritance tax) Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  17. Income Averaging • Example – farmer with income as follows: Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  18. Stock Relief • Opportunity for farmer to build up stock in his herd tax free. • Example 50 calves bought for €100 each, sold following for €400 each – Profit €15,000 Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  19. Stock Relief • Opportunity for farmer to build up stock in his herd tax free. • Option 1: Example 50 calves bought Feb 2010 for €100 each, assumed no costs, sold in December 2010 for €400 each – Profit €15,000 – fully taxable • Option 2: Calves held instead until Jan 2011 – Accounting profit of €15,000 in accounts at December as stock values have increased. This is fully tax free. For 2011, opening stock valued at €20,000, sales €20,000 – no taxable profits in either year! Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  20. Reclaiming VAT • Say you are considering buying new Bulk Tank or a second hand one from a farmer • New tank contains VAT at 21% (or 13.5% in some cases) • This makes second-hand tank less financially attractive! • Note another option would be to buy second-hand tank off a dealer Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  21. Hire Purchase versus Leasing • Say New Tractor – cost €60,000 • Different tax treatment • HP generally more efficient if VAT registered • Ability to manipulate profits with lease agreement Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  22. Land Leasing • Exemption from income tax for recipient if: • Over 40 and lease is: > 5 years €12,000 >7 years €15,000 >10 years €20,000 • Can make con-acre much cheaper and make expansion plans more definitive Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  23. Retirement Planning • Consider Pension Options • PRSA • Self Directed • Investment in alternative assets – rental properties, land etc • Continuation of income post transfer • Potential PRSI savings • Exemption limits for over 65’s • Beneficial for providing for siblings through parents Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  24. Succession Planning • Capital Gains Tax exemption on disposal: • Over 55 • Farming more than 10 years • Owned the land for more than 10 years • Capital Acquisitions Tax (Gift/Inheritance) • Limit €332,084, excess 25% • Reduction of 90% in value of land being received for tax purposes if pass the farmer test • Stamp Duty • Exemption if under 35, and continue farming for 6 years Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  25. Future Tax Outlook • Reduction in reliefs • Increase in taxes (per FG/Labour policies) • Planning essential for maximising your tax efficiency Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  26. Questions ? Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

  27. = Kieran Coughlan, Coughlan Accounting & Taxation Services Limited, 086-8678296

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