Farmers in Ireland receive a range of payments from the Department of Agriculture, Food and the Marine (DAFM), including EU Common Agricultural Policy (CAP) payments such as the Single Farm Payment.
The majority of farmers accurately record DAFM payments on their tax returns. However, a minority record their payments incorrectly. This brings them to Revenue’s attention, places an avoidable burden on them and draws Revenue resources away from focusing on non-compliant farmers that compete unfairly against compliant farmers.
Recording of Agricultural Payments on Form 11
Payments made under the Single Payment Scheme and payments that compensate farmers for income losses caused by reductions in output or for increases in costs of a revenue nature should be included as trading receipts when preparing annual accounts and are taxable as income. Such trading receipts should always be recorded in the “Extract from Accounts” section of the Form 11 return at Line 122 – “Receipts from Government Agencies“. Most of the payments made by the Department fall into this category. Under no circumstances should payments received from the Department be included in the “Sales / Receipts / Turnover” income (Line 121).
Where, however, a payment has been made specifically to compensate the farmer for identifiable capital expenditure, such payment will not be treated as part of the farming income, but will fall to be deducted in arriving at qualifying expenditure for capital allowances purposes – if capital allowances are claimed on the specific capital item. Such capital payments should always be recorded at Line 134 on the Form 11 – “Cash/Capital Introduced“.
Farming payments returned on the Form CT1 or Form 1 (Firms) should be recorded in the equivalent fields on those returns.
Non-taxable income received from the DAFM, for example payments related to the Afforestation Grant and Premium Scheme, should be recorded in Line 123 of the Form 11 – “Other Income including Tax Exempt Income“.
Avoiding Unnecessary Attention from Revenue
Revenue receives a wide range of information from other Government Departments, including details of farmers’ payments received from the DAFM. This information is analysed and compared against returns data from taxpayers in Revenue’s risk model, which informs the selection of taxpayers for audit or other compliance interventions.
Incorrectly recording DAFM payments, either by omission or by entries in fields other than those above, will result in mismatches when returns and third party sources are analysed. For example, an incorrect inclusion of DAFM payments in “Sales/Receipts/Turnover” (Line 121) would generate indications of under-reporting of income when the correct reporting location, “Receipts from Government Agencies” (Line 122), is analysed and found to be lower than expected compared to other data sources.
This type of error in completing tax returns will draw Revenue resources away from dealing with genuinely non-compliant farmers. Incorrectly recorded information requires Revenue interventions to seek clarifications, placing a burden on the farmer that can be avoided by making accurate returns.