Farmers with forests may be concerned about the tightening of the farm tax net by Revenue as featured in the Irish Farmer Journal recently. This report related to the payments of schemes notified by the Department of Agriculture, Food and the Marine (DAFM) to Revenue. These include direct payment schemes, GLAS, Areas of Natural Constraints, Sheep Welfare scheme and Knowledge Transfer. DAFM and other departments are obliged to pass on to Revenue information about individuals who are in receipt of payments from state-funded schemes.

So how does income from forestry fare for taxation purposes? Forest income comprises state aid, grants and premiums and timber sales. State premiums are paid for the first 15 years for most afforestation schemes, while revenue is generated thereafter from timber sales. This income is exempt from income tax, regardless of the status of the forest owners including individual farmers and other landowners, while companies are also exempt.

Even though revenue streams from premiums, woodland improvement and other grants are not regarded as income for taxation purposes, they must feature in annual accounts. Forest owners should be aware that annual accounts are necessary to ensure receipt of Tax Clearance Certificates, which are required by DAFM from all forest owners in receipt of annual forestry premium payments and/or grants exceeding €10,000.

All forestry income is subject to USC PRSI.

The USC rates are: 0.5% on income up to €12,012, 2% from €12,013 to €19,874, 4.5% from €19,875 to €70,044 and 8% on income over €70,044. There is a levy of 11% on self-employment income over €100,000.

The annual profit from forestry is fully liable to PRSI. Profit is defined as a financial gain when the amount of revenue earned exceeds the expenses, costs and taxes of producing timber. Farmers pay Class S contribution at a rate of 4%. These contributions entitle a farmer to the Treatment Benefit Scheme and to the Contributory State Pension scheme. Most employers and employees (over 16 years of age and under 66) pay PRSI contributions into the national Social Insurance Fund. In general, Revenue states that the payment of social insurance is compulsory.

Growing timber is exempt from Capital Gains Tax (CGT) but the land is not. Only the increase in the value of land is assessed for CGT. The CGT exemption for the disposal of the crop of trees applies only to individuals. It does not apply to companies or other bodies of persons.

Growing timber is also exempt from Stamp Duty but the land is not except when property is transferred between spouses and within group related companies. Otherwise the rates are: 7.5% for non-residential property, 1% for residential property up to €1.0m and 2% over €2.0m.

There are excellent summaries of forestry taxation on the IFA website (www.ifa.ie/guide-to-woodland-taxation/) along with the Irish Timber Growers Association (ITGA) Forestry and Timber Yearbook article by tax consultant Dermot Byrne, which can be ordered on the Association''s website (www.forestryyearbook.ie). However, taxation is a complex issue and forest owners should seek professional independent advice.