“This has been a lot of scaremongering in the last few weeks about having to have farm transfers done by the 31 December 2020 to avail of a stamp duty relief. Surely they will roll it over in the next Budget or if they don’t we will know in October and will still have time to transfer before the end of the year?”
Stamp duty
Stamp duty is payable on land transferred by deed such as a gift from parent to child or land being bought on the open market. The current rate of stamp duty on agricultural land is 7.5% of the market value of the land.
If you take the average farm of 80ac valued at an average price of €9,000 per acre this equates to a stamp duty bill of €54,000.
The Young Trained Farmer Stamp Duty Relief reduces this stamp duty bill to €0. However, if a child/nephew/niece is over 35 years or does not have the Green Cert, they cannot qualify for this relief.
Consanguinity relief
All is not lost. There is another relief called “consanguinity relief” which reduces the rate of stamp duty from 7.5% to 1%. To avail of this relief, there has to be a transfer of land between blood relatives and the child/nephew/niece (person receiving the land) has to farm the land for six years or lease to a farmer for six years from the date of the transfer.
This relief is due to expire on 31 December 2020 and while it might be extended in the Budget, I suspect it may be subject to an age restriction. Under the old format of the relief, the person transferring the land had to be under 67 years at the date of the transfer. That restriction was removed following intense lobby when the stamp duty rate shot up overnight a few years ago from 2% to 6%. They have given a period of time for people to get their houses in order, consequently I would not be surprised if the relief is extended but subject to an age restriction.
Using our previous example of 80 acres valued at €9,000/ac this equates to a stamp duty bill of €7,200. A child does not have to have the Green Cert to claim consanguinity relief. To obtain consanguinity relief, the following conditions must be satisfied:
There must be a transfer of land between blood relativesThe farmer (child/niece/nephew etc) must either farm the land for 50% of their normal working time OR lease to a farmer for six years from the date of the deed of transfer. If they intend to farm and they have the Green Cert they need not farm for 50% of their time but have to farm the land on a commercial basis with a view to the realisation of profit. The following scenarios illustrate where it may be worth availing of consanguinity relief:
If the child/niece/nephew etc does not intend to farm the land for 50% of their normal working time. Nowadays a lot of children work full time off farm and the income from farming can be taxed at the higher 40% rate so it is much more financially savvy to lease out the land and claim the income tax lease exemption rather than farming it and suffering tax at in excess of 40% on any profit. The lease exemption gives a tax-free farm income up to €18,000 where the land is leased for 5-7 years. This threshold rises the longer you lease it out with the top threshold being €40,000 where land is leased for 15 years or more.If the child/niece/nephew etc has already turned 35 years.Where the stamp duty bill is €3,000 or less. For example a 50ac farm worth €6,000/ac gives a stamp duty bill of €3,000 if the person is entitled to claim consanguinity relief. As the Green Cert Distance Learning Course can cost in excess of €3,000 it negates the value of the stamp duty saving.Conclusion
As the relief can result in substantial savings, it is worth checking out the tax position to inform yourself of the consequence of not being able to avail of this relief. While we should know whether it is extended in the budget speech normally delivered mid October, the devil is in the detail. That detail is normally not available until the Finance Act is signed into law, which last year happened on 22 December 2019 which probably would be too late for a farm transfer before 31 December 2020.
Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors does not accept responsibility for errors or omissions howsoever arising. Email aisling@agrisolicitors.ie
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“This has been a lot of scaremongering in the last few weeks about having to have farm transfers done by the 31 December 2020 to avail of a stamp duty relief. Surely they will roll it over in the next Budget or if they don’t we will know in October and will still have time to transfer before the end of the year?”
Stamp duty
Stamp duty is payable on land transferred by deed such as a gift from parent to child or land being bought on the open market. The current rate of stamp duty on agricultural land is 7.5% of the market value of the land.
If you take the average farm of 80ac valued at an average price of €9,000 per acre this equates to a stamp duty bill of €54,000.
The Young Trained Farmer Stamp Duty Relief reduces this stamp duty bill to €0. However, if a child/nephew/niece is over 35 years or does not have the Green Cert, they cannot qualify for this relief.
Consanguinity relief
All is not lost. There is another relief called “consanguinity relief” which reduces the rate of stamp duty from 7.5% to 1%. To avail of this relief, there has to be a transfer of land between blood relatives and the child/nephew/niece (person receiving the land) has to farm the land for six years or lease to a farmer for six years from the date of the transfer.
This relief is due to expire on 31 December 2020 and while it might be extended in the Budget, I suspect it may be subject to an age restriction. Under the old format of the relief, the person transferring the land had to be under 67 years at the date of the transfer. That restriction was removed following intense lobby when the stamp duty rate shot up overnight a few years ago from 2% to 6%. They have given a period of time for people to get their houses in order, consequently I would not be surprised if the relief is extended but subject to an age restriction.
Using our previous example of 80 acres valued at €9,000/ac this equates to a stamp duty bill of €7,200. A child does not have to have the Green Cert to claim consanguinity relief. To obtain consanguinity relief, the following conditions must be satisfied:
There must be a transfer of land between blood relativesThe farmer (child/niece/nephew etc) must either farm the land for 50% of their normal working time OR lease to a farmer for six years from the date of the deed of transfer. If they intend to farm and they have the Green Cert they need not farm for 50% of their time but have to farm the land on a commercial basis with a view to the realisation of profit. The following scenarios illustrate where it may be worth availing of consanguinity relief:
If the child/niece/nephew etc does not intend to farm the land for 50% of their normal working time. Nowadays a lot of children work full time off farm and the income from farming can be taxed at the higher 40% rate so it is much more financially savvy to lease out the land and claim the income tax lease exemption rather than farming it and suffering tax at in excess of 40% on any profit. The lease exemption gives a tax-free farm income up to €18,000 where the land is leased for 5-7 years. This threshold rises the longer you lease it out with the top threshold being €40,000 where land is leased for 15 years or more.If the child/niece/nephew etc has already turned 35 years.Where the stamp duty bill is €3,000 or less. For example a 50ac farm worth €6,000/ac gives a stamp duty bill of €3,000 if the person is entitled to claim consanguinity relief. As the Green Cert Distance Learning Course can cost in excess of €3,000 it negates the value of the stamp duty saving.Conclusion
As the relief can result in substantial savings, it is worth checking out the tax position to inform yourself of the consequence of not being able to avail of this relief. While we should know whether it is extended in the budget speech normally delivered mid October, the devil is in the detail. That detail is normally not available until the Finance Act is signed into law, which last year happened on 22 December 2019 which probably would be too late for a farm transfer before 31 December 2020.
Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors does not accept responsibility for errors or omissions howsoever arising. Email aisling@agrisolicitors.ie
Read more
Legal Matters: tax implications of my nephew buying my house
‘Can I shoot down a drone if I suspect it is surveilling my farm?’
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