Brian Cowen (Laois-Offaly, Fianna Fail)

The tax exemption for long-term leases of farmland is being increased to €20,000 per annum for leases of ten years or more in duration. An exemption from capital gains tax applies to disposals of farmland outside the immediate family on retirement. The present threshold for the exemption is €500,000 and this is being increased to €750,000 from 1 January 2007. In addition, where farmland that has been owned and worked by a farmer for over ten years is leased for fewer than five years, and is subsequently disposed of to the person leasing the land, the present retirement relief will also apply.

The last three changes are aimed in particular at encouraging the transfer of farm assets to younger and more progressive farmers. The various measures are detailed in the summary of budget measures and some will require EU state-aid approval before they are implemented.

In addition, the farmers' flat rate of VAT is being increased from 4.8% to 5.2% with effect from 1 January 2007, at a full year cost of €16 million. This flat rate is designed to recoup non-VAT registered farmers for the VAT they pay on their inputs. This increase reflects a number of changes in the method of calculating this refund rate following consultations with the farming bodies.

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