Budget Focus: Education, Farming and Inheritance

In this week’s article we take a look at some of the specific changes that occurred in the budget relating to education, farming and inheritance.
This week’s budget was keenly anticipated and dreaded across the country. There were cuts and increased taxation across the board. While many of the main changes, such as the €8 drop in jobseekers benefit, increased taxes on petrol and diesel, the 10% shrinking of the income tax bands and the imposition of a Universal Social Charge have been widely debated there are a number of key areas that have escaped any major attention. Unfortunately the news isn’t good.
Education, as one of the countries four main areas of expenditure, was not spared the brunt of the cuts. The student services charge for third level students is replaced by a flat rate higher education student contribution of €2,000 per year, with the second child paying €1,500. Also introduced is a €200 per year charge for Post-Leaving Certificate (PLC) students.
Of some concern for many families, will be the increase in the cost of post primary school transport to €350, and the introduction of a €50 fee at primary level, subject to a maximum family charge of €650. Medical card holders will however be exempt.
On top of this many grants, including Higher Education Grants Scheme, VEC Scholarship Scheme, Third Level Maintenance Grants for Trainees and Maintenance Grants for those attending PLC’s have been reduced by 4%. In addition to this the proportion of students qualifying for the non-adjacent rate of grant will be reduced by increasing the distance between the students’ home and college from 24km to 45km. The obvious implication of this is that those attending the IT in Tralee and living at home in the likes of Listowel or Castleisland will now no longer be able to receive this grant.
Funding for third level institutions are to be reduced by 5% and so too are grants for adult literacy and community education.
The key cutbacks in this area were forecasted for quite some time. One of these being, the winding down of the Rural Environmental Protection Scheme (REPS) with many of the REPS programs already receiving their last payments. Also announced was the reduction, by €5 million of intervention costs, money essentially used to stabilise commodity prices, such as milk or beef, in times of price fluctuation. Farm Assist was also reduced by €8.00 per week.
The existing 25% stock relief for farmers and special 100% relief for certain young trained farmers is set to continue for another two years.
The big announcement was the Department of Agriculture’s decision to cease processing applications for the Early Retirement Scheme (ERS). This now removes the option for farmers between 55 and 65 to retire and transfer or lease their land to an eligible young farmer.
Inheritance and Capital Gains Tax
The good news is that Capital Gains Tax, which is a tax on profits from the sale of assets and the accompanying reliefs are unchanged. Capital Acquisitions Tax (CAT) is the tax on gifts or inheritances. The rate at which CAT is charged has not changed. However, the group threshold tax exemptions i.e. the levels over which you pay tax on gifts or inheritances from family or extended family or strangers, have all been lowered by 20%.
For example the Group A threshold (gifts or inheritances from parents to children) was €542,544 in early 2009 but has now been reduced to €331,000 in this Budget. This means that a child inheriting assets from a parent has a solemnly reduced tax exemption of €331,000.
The total effect of the Budget 2011 remains to be seen in the forthcoming Finance Bill. We have critical times ahead.
If you have any questions please do not hesitate to contact our offices.