Kerry Co-op – Patronage Shares
The Revenue Commissioners have launched an investigation into the issue of so-called “patronage shares” by Kerry Co-op. Revenue letters have recently been received by up to 400 milk suppliers in the South West region inviting them to make a Qualifying Disclosure in relation to the Kerry Co-op shares within 21 days.
The shares in question were issued to farmers based on the volume of milk supplied to Kerry Group. Revenue is seeking Income Tax, USC and PRSI on the value of the shares received by the farmers. Revenue’s position is that the shares should have been included as part of the farmer’s trading income due to the business relationship between the farmers and Kerry Group.
Revenue has placed a valuation on the shares of €65 per share in 2011, €75 per share in 2012 and €90 per share in 2013. The tax demands issued by Revenue to individual farmers are understood to range from between €15,000 to €30,000.
It is believed that the matter came to Revenue’s attention due to the existence of a “grey market” in which the patronage shares are being traded at prices as high as €220. While Kerry Co-op shares theoretically have a nominal value, Kerry Co-op owns approximately 14% of Kerry Group plc, which is valued at around €1.6bn.
Kerry Co-op are contesting Revenue’s interpretation of the tax treatment applying to the Co-op shares and are seeking to bring a test case before the Tax Appeal Commissioners in relation to the matter. It is hoped that if this test case is brought, farmers affected may not be required to make payments until this test case is determined, although this has not yet been confirmed. Revenue are expected to write to farmers affected by this investigation in the coming days.
It is likely that Revenue will broaden its investigation in time to include the issue of patronage shares by other Co-ops.
If any of our clients are potentially affected by the above and require our assistance please let us know.