The Department of Finance will review the scope of extending section 664A of the Taxes Consolidation Act 1997 to include agricultural contractors.
According to Minister Paschal Donohoe, it “most likely” will take place in the first half 2022, following a two-year delay.
The minister said the present position is that agricultural contractors are not entitled to avail of relief from increases in the carbon tax on farm diesel under section 664A of the Taxes Consolidation Act 199.
The minister provided the above information to Sinn Féin’s Matt Carthy who raised a parliamentary question in the Dáil on Thursday, December 16th, 2021.
Carthy asked the minister about extending section 664A for the purpose of providing them with similar status as farmers regarding the carbon tax on green diesel.
Donohoe explained that ag contractors cannot avail of the relief because “farming, which is defined in section 654 of the Taxes Consolidation Act, requires the occupation of farmland”.
“Agricultural contracting does not involve the occupation of farmland,” he told the deputy.
“The measure is specifically targeted at the farming sector to address the particular problems faced by family farms.”
Furthermore, he added that his officials met with contractors’ representatives in December 2019.
He advised that his department was intending to schedule a review of the scheme in the context of a wider report on agri-tax reliefs and the government’s climate policy.
He claimed that the “onset of the Covid-19 pandemic in the intervening period caused the review to be deferred”.
In the meantime, he said the status quo has remained in relation to the application and scope of section 664A.
He outlined that his department is “hopeful that the way will be clear for the promised review to be carried out”.
Continuing, he said: “It should also be noted that, currently, those who incur expenses in relation to farm diesel in the course of their trade of agricultural contracting may claim an income tax or corporation tax deduction for these expenses, including any carbon tax charged in respect of the diesel.”
“Finally, and as the deputy will appreciate, decisions regarding taxation measures are made having regard to the annual Budget and Finance Bill processes, the sound management of the public finances and my department’s tax expenditure guidelines.”
“Furthermore, I must also have regard to ensuring that any tax measures are consistent with the need to meet our Climate Action Plan targets.”
Who is eligible to claim the relief?
According to documentation from Revenue, the relief is available to any person carrying on a trade of farming in the state and who, in a year of assessment (if an individual) or an accounting period (if a company), is entitled to a deduction for expenditure incurred on the purchase of farm diesel in taxing the profits of their trade.
However, the relief is not available in respect of expenditure on carbon tax on fuels other than farm diesel.