Brian Cowen (Laois-Offaly, Fianna Fail)

——to cover grants for approximately 60,000 farmers.

Farm Taxation

I am making a number of changes in the farm taxation area arising from reform of the Common Agricultural Policy and the recent growth in the adoption of innovative farm business structures. The payments to farmers under the EU sugar beet compensation package include an element for diversification aid. I am providing that the income from these diversification aid payments will be spread over six years for the purpose of calculating income tax liability. This measure follows on the Finance Act 2007 provision which has already provided for similar treatment of the restructuring element of the package. It will cost approximately €9 million next year.

The Finance Bill will include a provision to avert a claw-back of income tax when a farmer who has opted to avail of the special income tax averaging arrangements subsequently enters a milk production partnership. I am aware that, on occasion, the break-up of a farm partnership may be necessary because of changed personal circumstances. To facilitate developments of this nature, I intend to introduce a new relief from capital gains tax on the dissolution of farm partnerships. The relief will run for a period of five years and full details will be contained in the Finance Bill. This measure is estimated to cost approximately €5 million next year and in a full year. The farmers' flat rate addition for VAT is being retained at 5.2% for 2008.

The House will recall that in last year's Finance Act, I extended stamp duty relief for farm consolidation. I am pleased to state I have recently signed the order to commence this relief following the receipt of the necessary EU state aid approval.

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