A tax bill of €137,914, which Revenue claimed was due to it by two farmers following the sale of land, has been struck out after the Tax Appeal Commission ruled in favour of the farmers.

The commission ruled that Revenue could not levy capital gains tax on the land, as it had been farmed up to its sale and was entitled to capital gains tax relief.

The appealing farmer and his wife were the joint owners of 20 acres of land and a house purchased for €247,650 in 1991.

They sold 16.5 acres of the land in 2005 for €950,000, but did not pay capital gains tax on the sale.

They argued that, as the land sale did not exceed €1,000,000, retirement relief was available to them.

The farmer, who appealed the tax bill in 2015, claimed that retirement relief was available to both him and his wife under the Taxes Consolidation Act of 1997, on the basis that they had owned and farmed the land jointly for 10 years prior to the sale.

Revenue held that it did not consider that the lands had been farmed jointly and did not fall within the definition set out for relief under tax law.

Farming deer and selling fodder

The farmer and his wife stated that they had been farming the lands in the 10 years leading to its sale, holding a joint bank account and that they were both involved in the farming operation.

They said that up until 2002, they stocked the land with deer, but that this type of farming proved unsuccessful.

The married couple maintained they were entitled to retirement relief on gains made from selling the land. / Philip Doyle

Grass and hay were sold off the land from 2002 instead of continuing with deer, as the couple maintained that deer farming had built up the land’s fertility and allowed them grow this fodder up to 2005 without incurring significant input costs.

The payments made for hay, silage and grass to a neighbouring farmer amounted to a total of €6,850 for the years 2002 to 2004 - an average of €2,283 per year.

The Tax Appeal Commissioner accepted that the land had been “wholly or mainly occupied for the purposes of farming” between 1993 and 2005.

Wife’s role on farm

Revenue had disputed whether the husband and wife had both been involved in running the farm, despite them being jointly named on the farm bank account.

The Commissioner accepted evidence provided by the wife that she had been engaged in fencing and managing the land along with her husband, as well as looking after the deer.

Revenue claimed that the only documentary evidence of the woman’s involvement in the farm was the joint bank account held with her husband and that no invoices from suppliers or grant applications listed both of the farmers.

It suggested that this could show that she did not carry out farming activities on the land.

Cultural barriers

The Commissioner asked Revenue to consider the cultural barriers which would have existed to the woman being named on invoices from suppliers.

The woman’s husband stated that it was not normal practice for farmers’ wives to be named on invoices from suppliers and that it would have been highly unusual for any farming family to have sought such a position.

The Commissioner accepted that, on the balance of probabilities, both husband and wife had farmed the land from 1993 to 2005.

No capital gains payable

In 2005, when the land was sold, a farmer retiring and selling land between the ages of 55 and 66 was entitled to full retirement relief on capital gains up to a value of €500,000.

The Tax Appeal Commission found that each of the former landowners were entitled to the relief of €500,000 and their gain from the sale was €475,000 each.

It ruled that the farmer succeeded in showing that capital gains tax was not payable and reduced their capital gains tax bill for 2005 in respect of the lands in question to nil.