Brendan Griffin (Kerry, Fine Gael)
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157. To ask the Minister for Finance if the Revenue Commissioners will review its policy on patronage shares being assessed for income tax; and if he will make a statement on the matter. [37336/16]

Michael Healy-Rae (Kerry, Independent)
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162. To ask the Minister for Finance the status of letters issued to farmers regarding tax (details supplied); and if he will make a statement on the matter. [37474/16]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 157 and 162 together.

I would first note that, since the establishment of the Revenue Commissioners in 1923, successive Governments and the Oireachtas have reaffirmed the principle of the independence of the Revenue Commissioners in their dealings with the tax affairs of any individual under tax and customs legislation. This independence is seen as critical to maintaining the integrity of the taxation system and forms a key pillar of Revenue's Governance framework, and it would therefore be neither appropriate nor possible for a Minister for Finance to instruct the Revenue Commissioners to review their policy with regard to the administration of tax legislation.

I am advised by Revenue that patronage shares were received by suppliers of milk as a consequence of and in proportion to the quantity of milk supplied. Where the number of shares is based on and dependent on the level of business between the members and the cooperative or nominated purchaser and where the cooperative does not receive the market price for the shares issued, then the profit accruing i.e. the difference between the market value of the shares issued and the price paid for these shares, to the member is a trading receipt of the member's farming income. This is no different to the general tax treatment that applies to other forms of share based remuneration. Employees are liable to income tax on share awards for similar reasons the share award is linked to their work and as a consequence the value of any shares awarded is treated as taxable employment income.

Capital Gains Tax (CGT) applies to the growth in the value of a capital asset. For example, if an individual sells a share that grew in value after it was acquired, CGT would apply, subject to the availability of any exemption, on the increase in value between it being acquired and being sold. The matter at issue in the particular case, however, is the initial value of the shares received by farmers as a result of their trading relationship with the co-op. The shares were a form of payment received for the milk supplied by the farmers and therefore the value of the shares forms part of the trading income for the relevant years.

I am assured by Revenue that there has been no change in policy with regard to the imposition of income tax or CGT to share awards and they have emphasised that the matter at issue in this instance is the original market value of the shares received by farmers as a result of their trading relationship with the co-op.

I am further informed by Revenue that the letters which issued to certain farmers were invitations to engage with Revenue as regards their tax position for the years 2011 to 2013. The letters in question are in the first instance enquiries with the farmers concerned as to whether the value of the shares received has been included in the accounts for the years in question. Farmers who did include the share value in their accounts will not have any additional income tax liability in relation to the specific matter raised in these inquiries.

Early engagement with Revenue, where the share value received has been included in the accounts for the years in question, will mean an early conclusion of Revenue's enquiries. Early engagement with Revenue, where the share value received was not included in the accounts for the years in question, will facilitate a discussion between the individuals concerned and Revenue with a view to agreeing a mutually satisfactory arrangement, including if necessary, a phased payment arrangement, to deal with any tax liability involved. I am advised by Revenue that there have been extensive contacts with them in regard to this matter generally and they are and will be responding very quickly to those contacts in order to assist farmers to bring matters to an early conclusion.

I would ask the Deputies to encourage any farmers who have received a letter from Revenue in this matter to engage with Revenue without delay.