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If a farmer disposes of certain assets such as land, buildings, quota, shares, or entitlements, he or she may be liable to capital gains tax. The farmer must file a return for any 2016 gains or losses by the return filing date in 2017. Preliminary tax for capital gains tax is due as follows: disposals up to 30 November 2017 due by 15 December 2017. Disposals in December 2017, tax due 31 January 2018. Capital gains tax applies on all disposals whether or not consideration (money) passes. The rate is at 33%.
With this in mind, availability of reliefs is paramount to minimising the tax.
10 Annual exemption:
An annual exemption of €1,270 applies. Therefore you can make a gain of €1,270 and no tax applies. It is not transferable from one spouse to the other. Transfers between husband and wife are not liable to capital gains tax and losses sustained by one spouse are transferable to the other spouse.
11 Transfer of site to a child:
A site of up to one acre and up to a value of €500,000 can be made free from capital gains tax. It must be for the construction of the son or daughter’s principal private residence. If the house is not built and the site is disposed of or the house is not built, the relief can be clawed back. Beware of the value of the site as this will reduce the threshold for gift tax.
12 Entrepreneurial relief:
A 10% rate of tax applies on the sale of all or part of a farm business on sales from 1 January 2017. This relates to the individual owners, including farmers, of a trade or business. It does not apply to investments or development land. It applies on gains up to €1m. It reduces the standard rate of 33% to 10% for qualifying gains. The value of the relief can be up to €230,000.
13 Retirement relief
This relief is available to farmers over the age of 55. The farmer does not need to be retired to avail of it. The farmer must have owned and farmed the land for the 10 consecutive years prior to transfer or prior to entering into a letting/leasing agreement. There are two main versions. Within the family, farmers can transfer /dispose of chargeable business assets. Provided certain conditions are met, no capital gains will apply. If you are over 66, a limit of €3m applies.
For non-family transfers or transfers to unrelated parties, a farmer can transfer /dispose of assets up to €750,000 and have no liability. If you over 66 the limit is reduced to €500,000.
14 Disposal to Company
A relief applies where you dispose of all of your businesses and all assets to a company and no capital gains tax applies. However, conditions apply and need to be looked at on an individual basis.
15 Restructuring relief
If you acquire and dispose of agricultural land within 18 months of the earlier transaction a capital gains tax relief applies. The sale, purchase swap must be between farmers who spend not less than 50% of their time farming.
16 Losses
If you are disposing of assets, examine if you have unused losses. Ask have you assets that are of less value than when you acquired them. Could you dispose of these to generate a loss?
17 Small disposals
Small disposals of an asset where the value does not exceed €2,500 are exempt from capital gains tax.
18 Offshore property
If you have undeclared gains from the sale of offshore property/assets ensure you avail of the incentive announced by the revenue prior to 1 May 2017.
19 Transfers between spouses
Whilst exempt from capital gains tax, beware of the effect it may have on retirement relief.
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