Budget 2021 | Food/Drink & Agri-Business Overview

13 October 2020

Ciara Dillon, Tax Director and Head of the BDO Food/Drink & Agri-Business sector provides a breakdown of the measures and supports announced in Budget 2021 that are of relevance to the sector.

The measures and supports announced in Budget 2021 take into account the challenges posed by Brexit, Covid 19 and the increasing competitive global export markets while helping the sector to also meet its environmental objectives.

Given the importance of exports to the UK, the €340m to be spent on Brexit support measures in 2021 is welcome.

However, the quantum of EU €5bn Brexit Reserve fund allocated to Ireland and our Food, Drink & Agri-Business sector will be critical.

Given the number of SME companies operating in the sector, it was also helpful to hear the further initiatives and development of proposals to leverage European capital and create an equity fund to invest in domestic, high innovation enterprises.

Please see below some of the key relevant items announced today for the Food/Drink & Agri-Business sector:

Expenditure Measures and Supports:

Budget 2021, like Budget 2020, was prepared on the basis of no trade deal between the EU and the UK and that WTO terms will apply from 1 January 2021. In this context, the sector, which will be most impacted by a no deal Brexit, has seen the following measures announced:

  • €340m is to be spent on Brexit support measures in 2021 which include capital expenditure on ports and infrastructure. Of this, The Department of Agriculture was specifically allocated €29m; The Department of Enterprise Trade & Employment €26m and The Department of Finance €30m
  • The amounts allocated to The Department of Agriculture relate to support of additional staffing and additional funding for Bord Bia initiatives.

The Department of Agriculture, Food and the Marine has expenditure allocated of €1,826m and some additional key agri-food sector expenditure supports which include:

  • €45m for Covid Beef Scheme improving carbon efficiency 
  • €79m for new agri environmental schemes and other farm support measures
  • 33% increase in funding for the organic farming scheme
  • The extension of schemes such GLAS, BDGP and the Sheep Welfare Scheme which are important to ensure security of income for farmers
  • The provision of grant aid for capital investment by food companies to help them diversify products and markets
  • The establishment of the Food Ombudsman, which was an objective in the programme for government and is set to monitor unfair trading practices in the food supply chain. The Food Ombudsman will have responsibility of enforcing the EU unfair trading practices directive due to enter Irish Law in May 2021.

Taxation Measures:

  • Stamp duty:
    • Extension of the farm consolidation stamp duty relief to encourage farm consolidation to increase efficiency is appropriate. Also, the stamp duty relief is now in line with the CGT relief for farm consolidation which is also in place until December 2022.
    • Extension of the consanguinity relief to 31 December 2023: The primary rational for consanguinity relief. which reduces the stamp duty on transfers of agricultural land including farm buildings to 1% (from 7.5%), is to boost the rate of intergenerational transfer of farms. Therefore, the continuation of the relief to December 2023 is to be welcomed.
  • Accelerated capital allowances for energy  efficient equipment has been extended by 3 years to 31 December 2023.
  • €20million will be allocated to Department of Agriculture, Food and the Marine for new environment schemes to encourage and incentive farmers to farm a more sustainable way. This sum will be taken from the revenues generated as a result of the increase in carbon tax
  • An increase in the earned income tax credit to €1,650 (to align with PAYE workers) will be introduced for the self-employed
  • Expansion of the debt warehousing provision to include self-employed individuals who may not be able to meet their 2019 tax liability balance and 2020 preliminary tax obligations. Such individuals can defer payment for 1 year with 3% interest rate applying thereafter.
  • Increase in the Farmers VAT flat rate addition to 5.6% (from 5.4%).

If you have any queries related to the information above, please contact Ciara Dillon at [email protected]