Chapter II

Taxation of Farming Profits, Provisions in Respect of Certain Farm Losses and Restriction of Personal Allowances

13. —(1) In this Chapter “farming”, “farm land” and “occupation” have the same meaning as in section 18 (1) of the Finance Act, 1969.

(2) Any reference in this Chapter to farm land occupied by an individual includes farm land deemed, by virtue of section 17, to be occupied by him.

(3) A reference in this Chapter to the rateable valuation of farm land occupied by an individual at a particular time is a reference to the aggregate of the rateable valuations of all farm land occupied by him and of all farm land deemed to be occupied by him at that time and a reference to the rateable valuation of farm land occupied by an individual for a year of assessment or part of a year of assessment is a reference to the total rateable valuation of all farm land occupied by him and of all farm land deemed to be occupied by him for that year of assessment, or part of a year of assessment calculated in accordance with the provisions of section 17 (5), (6) and (7):

Provided that, in calculating the rateable valuation of farm land for the purposes of this Chapter, the rateable valuation of any building on the land shall be excluded.

14. — Section 18 (2) (a) of the Finance Act, 1969 , is hereby repealed.

15. —(1) Subject to subsection (3), all farming in the State shall be treated as the carrying on of a trade or, as the case may be, of part of a trade, and the profits or gains thereof shall be charged to tax under Case I of Schedule D accordingly.

(2) Notwithstanding anything to the contrary in Chapter III of Part IV of the Income Tax Act, 1967 , all farming carried on by any person whether solely or in partnership shall be treated as the carrying on of a single trade.

(3) Subsection (1) shall not apply, as respects any year of assessment, in the case of an individual who shows that the rateable valuation of all farm land occupied by him did not, at any time during that year of assessment, amount to £100 or more.

16. —(1) Section 15 (3) shall not have effect for any year of assessment in a case where farming is carried on in that year of assessment by an individual—

(a) who at any time in that year of assessment is also carrying on either solely or in partnership another trade or profession,

(b) whose spouse, in a case where the individual is a married person, is, at any time in that year of assessment, also carrying on either solely or in partnership another trade or profession,

(c) who, at any time in that year of assessment, is a director of a company carrying on a trade or profession and who is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other means, to control more than 25 per cent. of the ordinary share capital of the company, or

(d) whose spouse, in a case where the individual is a married person, is, at any time in that year of assessment, a director of a company carrying on a trade or profession and who is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other means, to control more than 25 per cent. of the ordinary share capital of the company:

Provided that paragraphs (b) and (d) shall not apply in a case where the wife of an individual is treated for tax purposes as not living with her husband.

(2) Subsection (1) shall apply in the case of a married person whose wife is carrying on farming and the provisions of that subsection shall have effect in such a case as if the references to the individual were a reference to his wife.

(3) This section shall not apply, as respects any year of assessment, in the case of an individual who shows that the rateable valuation of all farm land occupied by him did not, at any time during that year of assessment, exceed £50, or if it did so exceed £50, that any trade carried on by his spouse consisted solely of the provision of accommodation in buildings on the said farm land, the provision of such accommodation being ancillary to the farming of that farm land.

(4) For the purposes of paragraphs (c) and (d) of subsection (1), ordinary share capital which is owned or controlled in the manner referred to in that paragraph by a person being the wife, the husband or an infant child of a director, or by the trustee of a trust for the benefit of a person or persons being or including any such person or such director, shall be deemed to be owned or controlled by such director and not by any other person.

(5) In this section—

“company” means a company within the meaning of the Companies Act, 1963 ;

“director” includes a person holding any office or employment under a company;

“ordinary share capital” means all the issued capital (by whatever name called) of a company, other than capital the holders whereof have a right to a dividend at a fixed rate or a rate fluetuating in accordance with the standard rate of tax, but have no other right to share in the profits of the company.

17. —(1) For the purposes of this Chapter, farm land shall be I deemed to be occupied by an individual where it is occupied by his wife or it is farm land of which he or his wife is the beneficial owner or of which they are the beneficial owners and which is occupied by any other person or persons.

(2) Where farm land is occupied by an individual, or by his wife, in partnership with any other person or persons and neither he nor his wife is a beneficial owner of the farm land, the individual shall be deemed to occupy a proportionate part of that farm land and the rateable valuation of the proportionate part shall be so much of the total rateable valuation of the said farm land as bears to the said total rateable valuation the same proportion as his or her share, as may be appropriate, of the profits or losses on an apportionment thereof made in accordance with the terms of the partnership agreement as to the sharing of profits or losses bears to the total profits or losses of the partnership.

(3) Where farm land is beneficially owned by an individual, or by his wife, jointly with any other person or persons but is not occupied by the individual or his wife either solely or jointly with any other person or persons, the individual shall be deemed to occupy farm land the rateable valuation of which is an amount which is equal to such part of the total rateable valuation of the land of which he or his wife is a beneficial owner, as is proportionate to his or her share in the beneficial ownership of the said farm land.

(4) Where farm land is beneficially owned by an individual, or by his wife, jointly with any other person or persons and the said farm land is occupied by the individual or by his wife, in partnership with any other person or persons, he shall be deemed to occupy farm land the rateable valuation of which is an amount which is equal to such fractional part of the total rateable valuation of the land of which he or his wife is a beneficial owner as is proportionate to his or her share in the beneficial ownership of the said farm land.

(5) The total rateable valuation of farm land occupied by an individual for a year of assessment shall be the sum of—

(a) the rateable valuation of all farm land occupied by him or deemed to be occupied by him by virtue of subsection (1),

(b) the rateable valuation of all proportionate parts of farm land deemed to be occupied by him by virtue of subsections (2), (3) and (4).

(6) Where farm land is occupied by an individual for part only of any year of assessment, the rateable valuation of the farm land so occupied shall, for that year of assessment, be deemed for the purposes of this section to be an amount which bears to the total rateable valuation thereof the same proportion that the length of the period during which the said farm land was so occupied in the year of assessment bears to twelve months.

(7) Where by virtue of subsection (1), (2), (3) or (4) farm land is deemed to be occupied by an individual and for any year of assessment the circumstances by reference to which he is deemed to occupy that farm land or any proportionate part thereof obtained for part only of that year of assessment, the rateable valuation of any farm land deemed to be occupied by him shall, for that year of assessment, be deemed for the purposes of this section to be an amount which bears to the total rateable valuation of the said farm land the same proportion that the length of the period during which the said circumstances obtained in the year of assessment bears to twelve months.

18. —(1) Where, in the case of property valued under the Valuation Acts as a unit, a part is and a part is not farm land, the rateable valuation of each part shall be arrived at for the purposes of this Chapter by apportionment of the rateable valuation of the property.

(2) Where farm land valued under the Valuation Acts as a unit is divided into two or more distinct occupations, the rateable valuation of the part occupied by each occupier shall be arrived at for the purposes of this Chapter by apportionment of the rateable valuation of the farm land concerned.

(3) Any apportionment required by this section shall be made by the inspector according to the best of his knowledge and judgment.

(4) Section 67 (3A) (c) of the Income Tax Act, 1967 , (inserted by section 31 of the Finance Act, 1969 ) shall apply in respect of any apportionment made under this section as it applies in respect of any apportionment made under section 67 (3A) (b) of the said Act.

19. —(1) Where for any year of assessment an individual, other than an individual to whom section 16 applies, is chargeable to tax in respect of profits or gains from farming, the amount of tax so chargeable for that year of assessment shall not exceed—

(a) where the rateable valuation of the farm land occupied by him for that year of assessment does not exceed £100, one-twentieth of the tax appropriate to the profits or gains from farming;

(b) where the rateable valuation of the farm land occupied by him for that year of assessment exceeds £100, the amount arrived at by multiplying the tax appropriate to the profits or gains from farming by a fraction the denominator of which is twenty and the numerator of which is the number equivalent to the amount by which the rateable valuation of the land so occupied exceeds £99:

Provided that, in a case where there is no income chargeable to tax other than profits or gains from farming, the tax chargeable shall not exceed by an amount greater than £40 the amount of tax which would be chargeable in accordance with the provisions of this section if the rateable valuation of the farm land occupied by him were £1 less than the actual rateable valuation.

(2) For the purposes of this section, the tax appropriate to the profits or gains from farming shall, in relation to an individual, be so much of the tax that would, but for the provisions of this section, be payable in respect of the individual's total income as bears to that tax the same proportion as the amount of the profits or gains from farming included in the said total income bears to that total income.

(3) This section shall not apply in any case where the rateable valuation of the farm land occupied by an individual at any time during the year of assessment exceeds £119.

20. —(1) Where, for the year of assessment 1974-75, a person is, by virtue of section 15, chargeable to tax in respect of profits or gains from farming and would, in accordance with the provisions of section 58 (1) of the Income Tax Act, 1967 , be charged to tax under Case I of Schedule D on the full amount of the profits or gains of the year preceding that year of assessment, he may, by notice in writing given to the inspector within six months after the commencement of the said year of assessment, elect to be charged to tax for that year of assessment on the full amount of the profits or gains of that year and not on the full amount of the profits or gains of the year preceding that year of assessment.

(2) For the purposes of this section, the profits or gains of the year 1974 may, at the election of the person chargeable to tax in respect of them, be taken as the profits or gains of the year 1974-75.

21. —(1) Where, for the year of assessment 1974-75, an individual, other than an individual to whom section 16 applies, is, by virtue of section 15, chargeable to tax in respect of profits or gains from farming he may, by notice in writing given to the inspector within six months after the commencement of the said year of assessment, elect to be charged to tax for that year of assessment in respect of those profits or gains in accordance with the provisions of this section and not by reference to the provisions of section 58 (1) of the Income Tax Act, 1967 , or of section 20.

(2) Where an individual elects as provided for in subsection (1), he shall be charged to tax under Case I of Schedule D in respect of the profits or gains from farming on an amount equal to 40 times the rateable valuation of the farm land occupied by him for the said year of assessment less deductions in respect of—

(a) rates payable for that year of assessment in respect of the farm land so occupied; and

(b) (i) emoluments payable for that year of assessment to any person employed for the purpose of working the said farm land, in respect of such work, or

(ii) payments made to any other person for that year of assessment in respect of work of the kind referred to in subparagraph (i):

Provided that for the purposes of subparagraph (i) emoluments payable to a person connected with the individual shall be taken into account only in so far as they are paid to that person in cash.

(3) Where profits or gains from farming farm land are charged to tax in accordance with the provisions of subsection (2),

(a) the individual so charged shall be entitled to claim any deduction in respect of machinery or plant used for the purpose of farming the said farm land which he would be entitled to claim if he had been charged to tax on the full amount of those profits or gains, and

(b) any balancing charge which would fall to be made under section 272 of the Income Tax Act, 1967 , if the individual were charged to tax on the full amount of those profits or gains, may be made.

(4) In charging profits or gains in accordance with the provisions of this section, no deduction shall be allowed other than those specified in subsections (2) and (3).

(5) Where for the said year of assessment an individual is chargeable to tax under Case V of Schedule D in respect of the profits or gains from any rent or any receipts in respect of any easement in relation to any part of the farm land occupied by him, subsection (2) shall apply for the year of assessment to the farm land so occupied but excluding that part from which the said profits or gains chargeable under Case V of Schedule D arise:

Provided that this subsection shall not apply where the said rent or the said receipts are, having regard to values prevailing at the time, less than the amount which could have been obtained on the basis that the negotiations for the lease or the easement had been at arm's length.

(6) A person shall, for the purposes of this section, be regarded as connected with an individual if that person would be so regarded for the purposes of section 16 of the Finance (Miscellaneous Provisions) Act, 1968 .

22. —(1) This section applies to any person carrying on farming, the profits or gains of which are chargeable to tax in accordance with the provisions of section 15 (1).

(2) Where a person to whom this section applies incurs, for the purpose of farming farm land occupied by him, any capital expenditure on the construction of farmhouses, farm buildings, cottages, fences or other works, there shall be made in charging the profits or gains from farming the said farm land an annual allowance (in this section referred to as a farm buildings allowance) equal to one-tenth of the said expenditure for the first relevant year of assessment and for each subsequent year of assessment until the allowances made under this section in respect of the expenditure equal the amount of the expenditure:

Provided that this subsection shall not apply to any expenditure incurred before the 6th day of April, 1974,

(3) Any capital expenditure as aforesaid incurred on or after the 6th day of April, 1974, by a person about to carry on farming but before commencing farming shall, for the purposes of this section, be treated as if it had been incurred on the first day on which he commences farming.

(4) Where capital expenditure as aforesaid is incurred on a farmhouse, one-third only of that expenditure shall be taken into account, or, if the accommodation and amenities of the farmhouse are out of due relation to the nature and extent of the farm, such proportion thereof not greater than one-third as may be just.

(5) For the purposes of this section, the first relevant year of assessment, in relation to expenditure incurred by any person, is the year in his basis period (within the meaning of section 297 of the Income Tax Act, 1967 ) for which he incurs the expenditure.

(6) Any claim by a person for an allowance falling to be made to him under the provisions of this section shall be included in the annual statement required to be delivered under the Income Tax Acts of the profits or gains from farming, and the allowance shall be made as a deduction in charging those profits or gains, and section 241 (3) of the Income Tax Act, 1967 , shall apply in relation to the allowance as it applies in relation to deductions allowable in respect of wear and tear of machinery or plant.

(7) Any claim for an allowance under the provisions of this section shall be made to and determined by the inspector, but any person aggrieved by any decision of the inspector on any such claim may, on giving notice in writing to the inspector within twenty-one days after the notification to him of the decision, appeal to the Appeal Commissioners.

(8) The Appeal Commissioners shall hear and determine an appeal to them made under subsection (7) as if it were an appeal against an assessment to tax and the provisions of the Income Tax Acts relating to the rehearing of an appeal and the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications.

(9) Where a person who is entitled to an allowance under subsection (2) in respect of capital expenditure incurred for the purpose of farming farm land transfers his interest in that farm land or any part of that farm land to another person, that other person shall, to the exclusion of the first-mentioned person be entitled to the allowances under this section for the years of assessment following the year in which the transfer of interest took place:

Provided that where the transfer of interest took place in relation to part only of the farm land, this subsection shall apply to so much of the allowance as is properly referable to that part of the land as if it were a separate allowance.

(10) Where expenditure is incurred partly for the purposes of farming and partly for other purposes, subsection (2) shall apply to so much only of that expenditure as on a just apportionment ought fairly to be treated as incurred for the purposes of farming.

(11) No allowance shall be made by virtue of this section in respect of any expenditure if for the same or any previous or subsequent year of assessment an allowance is or has been made in respect of it under Chapter II of Part XV or Chapter I of Part XVI of the Income Tax Act, 1967 .

(12) Expenditure shall not be regarded for any of the purposes of this section as having been incurred by any person in so far as it has been met directly or indirectly by the State, by any board established by statute, or by any public or local authority.

23. —The repeal, by virtue of section 14 , of section 18 (2) (a) of the Finance Act, 1969 , shall not prevent section 20 of the said Act from applying to a dividend paid on or after the 6th day of April, 1974, in a case where the dividend is paid out of profits exempted from tax by virtue of the said section 18 (2) (a), or is paid in part out of such profits and in part out of other profits.

24. —No relief shall be given under section 309 of the Income Tax Act, 1967 , in respect of a loss sustained in any year of assessment prior to the year 1974-75 in the carrying on of farming, by deducting such loss from or setting it against the amount of the profits or gains from farming assessed for the year 1974-75 or any subsequent year of assessment.

25. —(1) In determining whether any, and if so what, wear and tear allowance, balancing allowance or balancing charge in respect of machinery or plant falls to be made to or on any person for any year of assessment in charging the profits or gains from farming, there shall be deemed to have been made to that person, for every previous year of assessment in which the machinery or plant belonged to him and which is a year of assessment to be taken into account for the purpose of this section, such wear and tear allowance or greater wear and tear allowance, if any, in respect of the machinery or plant as would have fallen to be made to him if, in relation to every such previous year—

(a) the profits or gains from farming had been chargeable to tax under Case I of Schedule D,

(b) farming had been carried on by him ever since the date on which he acquired the machinery or plant,

(c) the machinery or plant had been used by him solely for the purposes of farming ever since that date, and

(d) a proper claim had been duly made by him for wear and tear allowance in respect of the machinery or plant for every relevant year of assessment.

(2) There shall be taken into account for the purposes of this section every previous year of assessment in which the machinery or plant concerned belonged to the person and—

(a) during which the machinery or plant was not used by the person for the purposes of farming,

(b) during which farming was not carried on by him, or

(c) during which farming was carried on by him in such circumstances that the full amount of the profits or gains thereof was not liable to be charged to tax under Case I of Schedule D.

(3) Nothing in this section shall affect the provisions of section 272 (4) of the Income Tax Act, 1967 .

(4) In this section—

“balancing allowance” and “balancing charge” have the same meanings as in Chapter II of Part XVI of the Income Tax Act, 1967 ;

“wear and tear allowance” means a deduction allowed under section 241 of the Income Tax Act, 1967 .

26. — Section 307 of the Income Tax Act, 1967 , is hereby amended—

(a) by the substitution in subsection (1) of “trade other than farming, or in any” for “trade,”,

(b) by the substitution in subsection (1) of “or in farming in a case in which this section applies” for “or in the occupation of lands for the purposes of husbandry only”, and

(c) by the insertion after subsection (1) of the following subsection:

“(1A) This section applies in any case where farming is carried on other than in the case of an individual to whom section 15 (3) of the Finance Act, 1974, applies or would apply if the individual so claimed.”,

and the said subsection (1) of section 307, as so amended, is set out in the Table to this section.

TABLE

(1) Subject to the provisions of this section, where in any year of assessment any person has sustained a loss in any trade other than farming, or in any profession or employment, carried on by him either solely or in partnership, or in farming in a case in which this section applies or in the occupation of woodlands managed on a commercial basis and with a view to the realisation of profits, he shall be entitled, on making a claim in that behalf, to such repayment of tax as is necessary to secure that the aggregate amount of tax for the year ultimately borne by him will not exceed the amount which would have been borne by him if his income had been reduced by the amount of the loss.

27. —(1) In this section—

“basis year”, in relation to any capital allowance, shall be construed in accordance with section 317 (2) of the Income Tax Act, 1967 ;

“capital allowance” has the same meaning as in section 317 of the Income Tax Act, 1967 ;

“prior three years” in relation to a loss incurred in a year of assessment, means the last three years of assessment before that year;

“prior period of loss” means the prior three years, or, if losses were incurred in successive years of assessment amounting in all to a period longer than three years (and ending when the prior three years end), that longer period;

“market gardening” has the same meaning as in section 54 of the Income Tax Act, 1967 .

(2) (a) Any loss (including any amount in respect of allowances which, by virtue of section 318 of the Income Tax Act, 1967 , is to be treated as a loss) incurred in a trade of farming or market gardening shall not be available for relief under section 307 or 308 of that Act unless it is shown that, for the year of assessment in which the loss is claimed to have been incurred, the trade was being carried on on a commercial basis and with a view to the realisation of profits in the trade.

(b) Without prejudice to paragraph (a), any loss (including any amount in respect of allowances which by virtue of section 318 of the Income Tax Act, 1967 , is to be treated as a loss) incurred in any year of assessment in a trade of farming or market gardening shall not be available for relief under section 307 or 308 of the Income Tax Act, 1967 , if in each of the prior three years a loss was incurred in carrying on that trade.

(c) For the purposes of this section, the fact that a trade of farming or market gardening was being carried on at any time so as to afford a reasonable expectation of profit shall be conclusive evidence that it was then being carried on with a view to the realisation of profits.

(d) This subsection shall not restrict relief for any loss or any capital allowance if it is shown by the claimant that the whole of his farming or market gardening activities in the year next following the prior three years are of such a nature, and carried on in such a way, as would have justified a reasonable expectation of the realisation of profits in the future if they had been undertaken by a competent farmer or market gardener, but that, if that farmer or market gardener had undertaken those activities at the beginning of the prior period of loss, he could not reasonably have expected the activities to become profitable until after the end of the year next following the prior period of loss.

(e) This subsection shall not restrict relief where the carrying on of the trade forms part of, and is ancillary to, a larger trading undertaking.

(3) In ascertaining for the purposes of this section whether a loss was incurred in any year the rules applicable to Case I of Schedule D shall be applied.

(4) Where a trade of farming or market gardening is or falls to be treated as being carried on for a part only of a year of assessment by reason of its being set up and commenced, or discontinued, or both, in that year, subsection (2) shall have effect in relation to that trade as regards that part of that year.

(5) Subsection (2) shall not restrict relief for any loss or capital allowance if the trade was set up and commenced within the prior three years, and, for the purposes of this subsection, a trade shall be treated as discontinued, and a new trade set up, in any event which under any of the provisions of the Income Tax Acts is to be treated as equivalent to the permanent discontinuance or setting up of a trade.

(6) Where at any time there has been a change in the persons engaged in carrying on a trade of farming or market gardening, this section shall, notwithstanding subsection (5), apply to any person who was engaged in carrying on the trade immediately before and immediately after the change as if the trade were the same before and after without any discontinuance, and as if a person and another person with whom he is connected were the same person. In this subsection any question as to whether persons are connected shall be determined in accordance with the provisions of section 16 of the Finance (Miscellaneous Provisions) Act, 1968 .

(7) Any loss to which this section applies shall not be taken into account in computing profits or losses for the purposes of section 53 of the Finance Act, 1920.

28. —(1) Where, for any year of assessment, farm land is occupied by an individual in respect of whom, by virtue of section 15 (3), subsection (1) of that section does not apply and—

(a) the rateable valuation of the farm land occupied by him exceeds £20, and

(b) he is chargeable to tax for that year of assessment in respect of income other than income from farming (hereinafter referred to as other income),

this section shall apply.

(2) In any case in which this section applies for any year of assessment, the aggregate amount of the deductions to be made from the total income of the individual concerned for that year of assessment in respect of personal reliefs claimed by him shall be reduced by whichever of the following amounts is the lowest:

(a) an amount equal to one-half of the aggregate amount of the said deductions,

(b) the amount arrived at by multiplying by eighty the amount by which the rateable valuation exceeds £20, or

(c) the total amount of the profits or gains for that year of assessment from farming farm land, computed in the same way as they would be computed if they were profits or gains chargeable to tax under Case I of Schedule D.

(3) Where the individual concerned shows that the actual profits or gains from farming are of such an amount that the tax payable by him for that year of assessment is greater than the tax appropriate to the other income, the tax so payable shall be reduced to the amount of tax appropriate to the other income.

(4) For the purposes of this section, the tax appropriate to the other income shall be so much of the tax as would be payable in respect of the individual's total income, if the actual profits or gains from farming were chargeable to tax in accordance with the provisions of section 15 (1), as bears to that tax the same proportion as the other income bears to such total income.

(5) (a) Where, by virtue of an application under section 197 of the Income Tax Act, 1967 , tax is to be assessable and chargeable on the incomes of a husband and wife as if they were not married—

(i) the aggregate amount of the personal reliefs, the benefit flowing from which is to be allocated to the husband and wife, shall not exceed the total amount of the deductions in respect of those reliefs which are to be allowed in accordance with the provisions of this section; and

(ii) in the allocation of the said benefit between the husband and the wife in accordance with the provisions of section 193 of the said Income Tax Act, 1967 , account shall be taken of any reduction in the total amount of the said deductions by virtue of the provisions of this section and the amount of benefit flowing to the husband or the wife in respect of each particular relief as specified in the said section 193 shall be reduced in the proportion which the total amount of the deductions in respect of personal reliefs allowable by virtue of this section bears to the total amount of the said allowances which, but for the provisions of this section, would be allowable.

(b) Where in accordance with the provisions of subsection (3) of the said section 193, the amount of relief allocated to the husband or the wife exceeds the tax chargeable on his or her income, as the case may be, any balance calculated for the purpose of that subsection shall be reduced by the amount of tax which would be chargeable on the income of the husband or the wife, as the case may be, if any profits or gains from farming were chargeable to tax in accordance with the provisions of this Chapter.

(6) In this section—

“personal reliefs” has the same meaning as in section 193 of the Income Tax Act, 1967 .