Budget day brings the good news, but often the devil is in the detail. The finance bill published last Thursday identified exactly how the many agri tax measures announced in the budget will be implemented.

LANDOWNERS LETTING LAND TO OTHER FARMERS

Income tax: There are significant proposed changes to the value and qualifying conditions for the leased land income tax exemption.

The amounts qualifying for the relief have been increased, as shown in Figure 1.

Action: Examine your leases to assess their qualification for the increased exemption limits.

Limited company blockage removed: The budget proposes that a limited company carrying on a farming activity and leasing land from a farmer will now qualify that farmer for the income tax exemption. This change has the potential of increasing the prospective number of lessees available to a farmer leasing land and wishing to avail of the income tax leased land exemption.

Stamp duty: To level the playing field between conacre and leasing, it is proposed to exempt agricultural leases of between five and 35 years in duration to active farmers from stamp duty. It is expected that for a person to qualify as an active farmer, they will have to spend not less than 50% of their normal working time farming the land on a commercial basis.

Capital gains tax (CGT): Gift and inheritance tax is a tax on the person receiving property, while CGT is a tax on the person disposing of the property.

CGT retirement relief is the main relief for CGT for landowners over 55 years of age disposing of farmland. A qualifying condition for CGT retirement relief is being amended so that land, subject to satisfying existing qualifying conditions, that has been let for up to 25 years in total (increased from 15) ending with the disposal qualifies for this relief on intra-family transfers. The change applies to disposals occurring on/after 1 January 2015.

Action: Landowners not formerly entitled to CGT retirement relief may now qualify – examine.

Land let on conacre: For a sale or transfer of land outside the family, the special €750,000 CGT retirement relief (€500,000 for disposals made by farmers age 66 years and over) is being extended, subject to satisfying existing qualifying conditions, to land currently let on conacre where that land is disposed of on or before 31 December 2016.

If the land let on conacre is not disposed of before 31 December 2016, then the landowner can still avail of the special CGT retirement relief post-31 December 2016, provided, prior to that date, a long-term lease (minimum of five years to a maximum of 25 years) has been entered into.

The change applies to disposals occurring on or after 1 January 2015.

Window of opportunity: 31 December 2016 is an important date for landowners letting land for conacre if they wish to qualify for CGT retirement relief.

PERSONS RECEIVING A GIFT OR INHERITANCE OF FARMLAND

Where a farmer receives a gift or inheritance of agricultural property, the market value of the agricultural property may be reduced by 90% in calculating the tax bill. This is a very valuable relief.

Currently, neither the transferor nor the transferee need to be farming the land in order to qualify for the relief.

From 1 January 2015, in addition to satisfying the existing qualifying conditions, the relief will be even harder to qualify for, as it will be available in only two situations:

On agricultural property gifted to, or inherited by, active farmers; or to individuals who are not active farmers but who immediately lease out the land on a long-term basis (at least six years) for agricultural use to an active farmer.

The impact of these changes is to target the very valuable 90% reduction in the value of land to be taxed to where the person getting the land must either be an active farmer, or, where not an active farmer, has leased out the land on a long-term basis for agricultural use to an active farmer.

It is expected that for a person to qualify as an active farmer, they must spend not less than 50% of their normal working time farming the land on a commercial basis.

Action: The new agricultural value relief qualifying conditions will operate from 1 January next – review your will and succession plans now.

FARMERS PLANNING TO CONSOLIDATE THEIR HOLDINGS

A major problem for farmers wishing to consolidate their farm holdings was that the proceeds from the sale of a portion of land was liable to CGT, thereby reducing the amount available for reinvestment.

The 2013 budget introduced a CGT for farmers in this position who sold land to fund the purchase of another piece of land as part of their individual farm restructuring/consolidation plan. The relief also applies to land swaps.

Two of the qualifying conditions have been changed in the 2015 Budget as follows:

The period up to which the initial qualifying sale or purchase transaction must occur has been extended to 31 December 2016.

A whole farm replacement will qualify from 1 January 2015. The relief currently only applies to consolidation of fragmented holdings but not to the replacement of the full farm.

LANDOWNERS OVER 65 YEARS AFTER DECEMBER 2014

There is a stamp duty relief where transfers of land are to a related party.

Currently, the relief reduces the stamp duty rate from 2% to 1% on land transfers occurring up to 31 December 2014.

The budget extends the period for three years to 31 December 2017, provided the transferor is 65 years or under and the transferee is an active farmer.

If aged over 65 after 31 December next, and transfer land after that date, then the stamp duty will increase from 1% to 2% of the market value.

LANDOWNERS OVER 66 YEARS OF AGE TODAY

While examining your stamp duty position, you should also consider previous budget changes penalising farmers over 66 years of age as follows.

Non-family sales and transfers relief reduced: The €750,000 CGT retirement relief, which applies to the sale or transfer of land, sites etc, to non-family members, was reduced to €500,000 for those transfers on/after 1 January 2014 by farmers aged over 66 years.

Intra-family transfer relief capped: The availability of CGT retirement relief on transfers by farmers over 66 years of age occurring on/after 1 January 2014 on intra-family land sales and transfers is capped at €3m.

LANDOWNERS OWNING ZONED LAND

Introduced in 2009, the windfall tax applied an 80% rate of tax to land disposals or land development where those profits or gains were attributable to a planning decision by a planning authority. With effect from 1 January 2015, the windfall tax is being abolished.

Action: If you have land which was zoned for development, it will not, if disposed of on or after 1 January 2015, be subject to the 80% windfall tax, but to the normal 33% CGT rules.