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39 1997

TAXES CONSOLIDATION ACT, 1997

CHAPTER 2

Farming: relief for increase in stock values

Interpretation ( Chapter 2 ).

[FA96 s133]

665. —In this Chapter—

accounting period”, in relation to a person, means—

(a) where the person is a company, an accounting period determined in accordance with section 27 , or

(b) where the person is not a company, a period of one year ending on the date to which the accounts of the person are usually made up,

but, where accounts have not been made up or where accounts have been made up for a greater or lesser period than one year, the accounting period shall be such period not exceeding one year as the Revenue Commissioners may determine;

chargeable period” has the same meaning as in section 321 (2);

company” has the same meaning as in section 4 ;

period of account”, in relation to a person, means a period for which the accounts of the person have been made up;

person” means a person resident in the State and not resident elsewhere and, unless the contrary intention appears, includes a company;

specified return date for the chargeable period” has the same meaning as in section 950 ;

trading income”, in relation to the trade of farming, means—

(a) where the person is a company, the income from the trade computed in accordance with the rules applicable to Case I of Schedule D, or

(b) in the case of any other person, the profits or gains of the trade computed in accordance with the rules applicable to Case I of Schedule D;

trading stock”, in relation to the trade of farming, has the same meaning as in section 89 and, in determining the value of a person's trading stock at any time for the purposes of a deduction under section 666 , to the extent that at or before that time any payments on account have been received by the person in respect of any trading stock, the value of that stock shall be reduced accordingly.

Deduction for increase in stock values.

[FA96 s134; FA97 s18]

666. —(1) Subject to this Chapter, where—

(a) a person carries on in an accounting period the trade of farming in respect of which the person is within the charge to tax under Case I of Schedule D, and

(b) the value of the person's trading stock of that trade at the end of the accounting period (in this Chapter referred to as its “closing stock value”) exceeds the value of the trading stock of that trade at the beginning of the accounting period (in this Chapter referred to as its “opening stock value”),

the person shall, in the computation for the purposes of tax of the trading income of that trade, be entitled to a deduction under this section equal to 25 per cent of the amount of that excess as if the deduction were a trading expense incurred in the accounting period, and the amount of that excess is referred to in this Chapter as the person's “increase in stock value”.

(2) In the case of a company—

(a) the amount of the deduction under this section in an accounting period shall not exceed the amount of the company's trading income for that period after all reductions of income for that period by virtue of sections 396 and 397 and after all deductions and additions for that period by virtue of sections 307 and 308 and before any deduction allowed by virtue of this section, and

(b) where a deduction allowed by virtue of this section in computing the company's income from the trade of farming for an accounting period applies for an accounting period (in this subsection referred to as “the relevant period”), the company shall not be entitled to—

(i) a deduction under section 307 or 308 for any accounting period later than the relevant period in respect of any allowance treated as a trading loss of the trade before the commencement of the relevant period,

(ii) a set-off of a loss under section 396 for any accounting period later than the relevant period in respect of a loss sustained in the trade before the commencement of the relevant period, or

(iii) a set-off of a loss under section 397 for any accounting period earlier than the relevant period in respect of a loss sustained in the trade.

(3) In the case of a person other than a company, where a deduction allowed by virtue of this section in computing the person's trading profits of the trade of farming for an accounting period applies for a year of assessment (in this subsection referred to as “the relevant year”)—

(a) the person shall not be entitled to relief—

(i) under section 382 for any year of assessment later than the relevant year in respect of a loss sustained in the trade before the commencement of the relevant year, or

(ii) under section 385 for any year of assessment earlier than the relevant year in respect of a loss sustained in the trade,

(b) section 304 (4) or that section as applied by any other provision of the Income Tax Acts shall not apply as respects a capital allowance or part of a capital allowance which is or is deemed to be all or part of a capital allowance for the relevant year and to which full effect has not been given in that year because there were no profits or gains chargeable for that year or there was an insufficiency of profits or gains chargeable for that year,

(c) section 392 shall not apply to the capital allowances or any part of such allowances for the relevant year, and

(d) the amount of any deduction given under this section shall not exceed the amount of the person's trading income from the trade of farming for the relevant year before any deduction allowed by virtue of this section.

(4) (a) A deduction shall not be allowed under this section in computing a company's trading income for any accounting period which ends on or after the 6th day of April, 1999.

(b) Any deduction allowed by virtue of this section in computing the profits or gains of the trade of farming for an accounting period of a person other than a company shall not apply for any purpose of the Income Tax Acts for any year of assessment later than the year 1998-99.

(5) A person shall not be entitled to a deduction under this section for any chargeable period unless a written claim for such a deduction is made on or before the specified return date for that chargeable period.

(6) This section shall apply to a trade of farming carried on by a partnership as it applies to a trade of farming carried on by a person.

Special provisions for qualifying farmers.

[FA94 Sch6; FA96 s135; FA97 s19]

667. — (1) In this section, “qualifying farmer” means an individual who—

(a) in the year 1993-94 or any subsequent year of assessment first qualifies for grant aid under the Scheme of Installation Aid for Young Farmers operated by the Department of Agriculture and Food under Council Regulation (EEC) No. 797/85 of 12 March 19851 or that Regulation as may be revised from time to time, or

(b) (i) first becomes chargeable to income tax under Case I of Schedule D in respect of profits or gains from the trade of farming for the year 1993-94 or any subsequent year of assessment,

(ii) has not attained the age of 35 years at the commencement of the year of assessment referred to in subparagraph (i), and

(iii) at any time in the year of assessment so referred to—

(I) is the holder of a qualification set out in the Table to this section (in this subparagraph referred to as “the Table”) and, in the case of a qualification set out in subparagraph (c), (d), (e), (f) or (g) of paragraph 3, or in paragraph 4, of the Table, is also the holder of a certificate issued by Teagasc— The Agricultural and Food Development Authority (in this section referred to as “Teagasc”) certifying that such person has satisfactorily attended a course of training in farm management the aggregate duration of which exceeded 80 hours; but, where Teagasc certifies that any other qualification corresponds to a qualification set out in the Table, that other qualification shall for the purposes of this subsection be treated as if it were the corresponding qualification so set out,

(II) (A) has satisfactorily attended full-time a course at a third-level institution in any discipline for a period of not less than 2 years' duration, and

(B) is the holder of a certificate issued by Teagasc certifying satisfactory attendance at a course of training in either or both agriculture and horticulture the aggregate duration of which exceeded 180 hours,

or

(III) if born before the 1st day of January, 1968, is the holder of a certificate issued by Teagasc certifying that such person has satisfactorily attended a course of training in either or both agriculture and horticulture the aggregate duration of which exceeded 180 hours.

(2) In the case of a qualifying farmer—

(a) section 666 (1) shall apply as if “100 per cent” were substituted for “25 per cent”;

(b) paragraph (a) shall apply in computing a person's trading profits for an accounting period in the case of an individual who becomes a qualifying farmer—

(i) on or after the 6th day of April, 1993, and before the 6th day of April, 1995, for the year of assessment 1995-96 and for each of the 3 immediately succeeding years of assessment,

(ii) on or after the 6th day of April, 1995, and before the 6th day of April, 1997, for the year of assessment inwhich the individual becomes a qualifying farmer and for each of the 3 immediately succeeding years of assessment, or

(iii) on or after the 6th day of April, 1997, and before the 6th day of April, 1999, for the year of assessment in which the person becomes a qualifying farmer and for the immediately succeeding year of assessment.

TABLE

1. Qualifications awarded by Teagasc:

(a) Certificate in Farming;

(b) Diploma in Commercial Horticulture;

(c) Diploma in Amenity Horticulture;

(d) Diploma in Pig Production;

(e) Diploma in Poultry Production.

2. Qualifications awarded by the Farm Apprenticeship Board:

(a) Certificate in Farm Management;

(b) Certificate in Farm Husbandry;

(c) Trainee Farmer Certificate.

3. Qualifications awarded by a third-level institution:

(a) Degree in Agricultural Science awarded by the National University of Ireland through the National University of Ireland, Dublin;

(b) Degree in Horticultural Science awarded by the National University of Ireland through the National University of Ireland, Dublin;

(c) Degree in Veterinary Science awarded by the National University of Ireland through the National University of Ireland, Dublin;

(d) Degree in Rural Science awarded by the National University of Ireland through the National University of Ireland, Cork or by the University of Limerick;

(e) Diploma in Rural Science awarded by the National University of Ireland through the National University of Ireland, Cork;

(f) Degree in Dairy Science awarded by the National University of Ireland through the National University of Ireland, Cork;

(g) Diploma in Dairy Science awarded by the National University of Ireland through the National University of Ireland, Cork.

4. Certificates awarded by the National Council for Educational Awards:

(a) National Certificate in Agricultural Science studied through Kildalton Agricultural College and Waterford Regional Technical College;

(b) National Certificate in Business Studies (Agribusiness) studied through the Franciscan Brothers Agricultural College, Mountbellew, and Galway Regional Technical College.

Compulsory disposals of livestock.

[FA96 s136]

668. — (1) In this section—

excess” means the excess of the relevant amount over the value of the stock to which this section applies at the beginning of the accounting period in which the disposal takes place;

relevant amount” means the amount of any income received by a person as a result or in consequence of a disposal of stock to which this section applies;

stock to which this section applies” means all cattle forming part of the trading stock of the trade of farming, where such cattle are compulsorily disposed of on or after the 6th day of April, 1993, under any statute relating to the eradication or control of diseases in livestock, and for the purposes of this section all cattle shall be regarded as compulsorily disposed of where, in the case of any disease eradication scheme relating to the eradication or control of brucellosis in livestock, all eligible cattle for the purposes of any such scheme, together with such other cattle as are required to be disposed of, are disposed of.

(2) Where stock to which this section applies is disposed of in an accounting period by a person carrying on the trade of farming, the person may elect to have the excess treated in accordance with subsections (3) to (5), and such election shall be made in such form and contain such information as the Revenue Commissioners may require.

(3) (a) Notwithstanding any other provision of the Tax Acts apart from paragraph (b), where a person elects in accordance with subsection (2), the excess shall be disregarded as respects the accounting period in which it arises and shall instead be treated for the purposes of the Tax Acts as arising in equal instalments in each of the 2 immediately succeeding accounting periods.

(b) Notwithstanding paragraph (a), where the person further elects, the excess shall be treated as arising in such equal instalments in the accounting period in which it arises and in the immediately succeeding accounting period.

(4) Where, not later than the end of the succeeding accounting period or succeeding accounting periods, as appropriate, referred to in subsection (3), the person incurs expenditure on the replacement of cattle in an amount not less than the relevant amount, the person shall be deemed to be entitled to a deduction under section 666 in respect of the amount of the excess, that section being applied as if “100 per cent” were substituted for “25 per cent”; but, where the expenditure incurred on such replacement is less than the relevant amount, the deduction under section 666 in each of the 2 accounting periods referred to in paragraph (a) or (b) of subsection (3) shall be reduced to an amount that bears the same proportion to the excess as the expenditure incurred in those 2 accounting periods bears to the relevant amount.

(5) An election under this section shall be made by notice in writing made on or before the specified return date for the chargeable period in which the stock to which this section applies is compulsorily disposed of.

Supplementary provisions (Chapter 2).

[FA96 s137]

669. — (1) (a) Where a person has acquired or disposed of trading stock otherwise than in the normal conduct of the trade of farming, the person shall be treated for the purposes of this Chapter as having, at the beginning or end of the relevant period of account, trading stock of such value as appears to the inspector (or on appeal to the Appeal Commissioners) to be just and reasonable having regard to all the circumstances of the case.

(b) Where the value of a person's trading stock at the beginning of a period of account is not calculated on the basis used for the calculation of the value of the trading stock at the end of that period, the value of the trading stock at the beginning of that period shall for the purposes of this Chapter be treated as being what it would have been if it had been calculated on that basis.

(2) (a) In any case where a person's accounting period does not coincide with a period of account or with 2 or more consecutive periods of account, the person's increase in stock value in the accounting period shall be determined for the purposes of section 666 not in accordance with subsection (1) of that section but by reference to a period (in this section referred to as “the reference period”) determined in accordance with this subsection.

(b) In any case where the beginning of a person's accounting period does not coincide with the beginning of a period of account, the reference period shall begin at the beginning of the period of account which is current at the beginning of the person's accounting period.

(c) In any case where the end of the person's accounting period does not coincide with the end of a period of account, the reference period shall end at the end of the period of account which is current at the end of the person's accounting period.

(d) In any case where paragraph (b) does not apply, the reference period shall begin at the beginning of the person's accounting period and, in any case where paragraph (c) does not apply, the reference period shall end at the end of the person's accounting period.

(3) (a) In any case where subsection (2)(a) applies, a person's increase in stock value in the accounting period shall be determined for the purposes of section 666 by the formula—

A × (C − O)

___________

N

where—

A is the number of months in the person's accounting period,

C is the value of the person's trading stock at the end of the reference period,

O is the value of the person's trading stock at the beginning of the reference period, and

N is the number of months in the reference period.

(b) In any case where a person's increase in stock value in an accounting period is to be determined in accordance with paragraph (a), then, in section 666 and in subsections (4) to (6), any reference to the person's closing stock value shall be construed as a reference to the value of the person's trading stock at the end of the reference period.

(4) (a) A person shall not be entitled to a deduction under section 666 for an accounting period if that accounting period ends by virtue of the person ceasing to—

(i) carry on the trade of farming,

(ii) be resident in the State, or

(iii) be within the charge to tax under Case I of Schedule D in respect of that trade.

(b) In any case where a person's increase in stock value in an accounting period is to be determined in accordance with subsection (3)(a), paragraph (a) shall apply as if the reference in that paragraph to the person's accounting period were a reference to any of the accounting periods comprised in the person's reference period.

(5) (a) Subject to paragraphs (b) to (d), where a person claims a deduction under section 666 and, immediately before the beginning of an accounting period, the person was not carrying on the trade to which the claim relates, then, unless—

(i) the person acquired the initial trading stock of that trade on a sale or transfer from another person on that person's ceasing to carry on that trade, and

(ii) the stock so acquired is or is included in the person's trading stock as valued at the beginning of the accounting period,

the person shall be treated for the purposes of section 666 and subsections (1) to (4) as having at the beginning of the accounting period trading stock of such value as appears to the inspector to be just and reasonable.

(b) In determining for the purposes specified in paragraph (a) the value of trading stock to be attributed to a person at the beginning of the accounting period, the inspector shall have regard to all the relevant circumstances of the case and in particular to—

(i) movements during the person's accounting period in the costs of items of a kind comprised in the person's trading stock during that period, and

(ii) changes during that period in the volume of the trade in question carried on by the person.

(c) The Appeal Commissioners dealing with an appeal from the decision of an inspector on a claim in a case where in accordance with paragraph (a) the inspector has attributed to a person at the beginning of an accounting period trading stock of a particular value shall, in hearing and determining the appeal in so far as it relates to the value of the trading stock to be so attributed, determine such value as appears to the Appeal Commissioners to be just and reasonable, having regard to those factors to which the inspector is required to have regard by virtue of paragraph (b).

(d) In any case where subsection (2)(a) applies to a person's accounting period, for any reference in paragraphs (a) to (c) to that accounting period there shall be substituted a reference to the reference period.

(6) In any case where a person's accounting period or reference period consists of a number of complete months and a fraction of a month, any reference in this section to the number of months in the period shall be construed as including that fraction of a month (and in any case where any such period is less than one month any such reference shall be construed as a reference to that fraction of a month of which the period consists).

1O.J. No. L93 of 30.3.1985, p.6.