After one year, 46 submissions and 300 different options to consider, the Agri-taxation Review was launched as part of the budget.

Many existing tax measures were maintained, but 12 new ones were introduced. Seven of these were directly linked to pushing landowners away from conacre and into long-term leasing. Their overall aim was to make long-term leasing the first option considered by landowners who are not active farmers.

Here is an outline of the new measures, their impact and the thinking behind them:

1Increase the income threshold for relief from leasing income by 50% (see graphic). These can be doubled when land leased out is in joint names. The dramatic lift will see few being hampered by the ceiling even when entitlements are included. By making the carrot bigger, they are hoping that more will look. The Department makes the point that even older farmers on the State old-age pension of €12,000 would benefit from the tax-free incentives offered for long-term leasing compared to conacre.

2A fourth threshold of 15 years or more was introduced, with landowners able to get up to €40,000 per year tax-free from land and entitlements. When 10 years was the longest period, that is what people went for. This is clearly to facilitate situations where high investment and long time frames are needed to develop farms, for example where dairy units are to be installed. The banks were also keen to match loan terms with the length of the lease.

3Remove the lower age threshold of 40 for eligibility to tax-free leasing incentives. With 25% of farms inherited by people not in farming, it makes sense that someone under 40 could avail of the tax-free incentives if they don’t want to farm land.

4Allow farmers in limited companies be eligible lessees for tax purposes. These cannot be connected, so the farmer cannot lease land to his own company. The anomaly had emerged as more progressive farmers moved into limited companies and found they were unable to compete for land where owners wanted the tax-free incentive.

5Remove all stamp duty on leases of five years or more for agricultural land. A simple one aimed at levelling the playing field between conacre and leasing. The only loser will be auctioneers who were getting a yearly commission from conacre. Farmers must stamp the leases with revenue and the tenant must still register leases with the property services regulatory authority.

6More targeted agricultural relief. Targeting the attractive 90% agricultural relief from Capital Acquisition Tax to where the person getting the land must either be a full-time farmer (50% of his/her time spent on the farm) or have agricultural qualifications. The person will have three years from the time they get the land to gain the qualifications. The only other option for the person to qualify for the relief is to lease out the land for six years or more.

7Extension of the eligible letting period up to 25 years for assets that can benefit from retirement relief. This is aimed at the issue where families with young children were being forced to go back farming after 15 years. But remember, landowners must move to a five-year lease if transferring to someone other than a child.

8Making conacre eligible for retirement relief until the end of 2016. A once-off measure that will allow farmers currently letting their land out in conacre to be eligible for retirement relief if they are transferring land to someone other than a child. It gives these landowners until the end of 2016 to either transfer or move into a long-term lease to avoid a potentially large tax bill.

9The extension of the stamp duty relief (50% reduction) to a related person. This was due to end on 1 January 2015. As it was seen as an important relief to encourage transfer of the family farm, it was extended until the end of 2017.

10 Whole farm replacement is now eligible for farm capital gains tax relief. The measure was initiated in Budget 2013 but did not allow the farmer to sell all parcels of fragmented farms and move to another farm. The farmer must consolidate the number of parcels being farmed in a whole farm situation in doing so (ie three down to two parcels) while part-farm consolidation must cut the distance from the home farm. The measure is extended until the end of 2016.

11 Income averaging increased from three to five years. This is aimed at smoothing out income volatility and will come into action in 2015. The simplest way possible to cope with volatile farm incomes in the absence of deposit schemes.

12 Allow income from an on-farm diversification to be included in income averaging for the first time. This will help farmers and their spouses already doing on-farm diversification but also encourage more to go this route.

In addition to the new measures, 13 existing ones were retained. They include the stamp duty relief for young farmers and the current capital allowances. The incentives for partnerships are also retained, although new proposals in this area are expected in 2015. Agricultural relief for capital acquisitions tax is retained at 90% and changes to retirement relief made in Budget 2014 are kept the same. CAT thresholds also remain the same.

More importantly, the work is not fully done, with the working groups focused on getting income averaging for forestry clear-felling and also incentives for buying energy-efficient equipment. They are also still looking at the feasibility of a risk deposit scheme along the lines of the French system to further protect farmers against volatility. The introduction of a phased transfer partnership model to allow transfer of a family farm over a defined period is also being considered.