I am trying to agree compensation with a local authority regarding land taken by them under a Compulsory Purchase Order (CPO) for a road.
I am contemplating going to arbitration as I do not feel that I am getting enough. Would I be entitled to interest? What tax might I have to pay? Can they take possession before the compensation settlement is agreed?
ANSWER: The Notice of Entry gives the landowner a minimum of 14 days notice of their intention to take possession of the lands. Depending on the works programme, it may be more than 14 days before the local authority actually takes possession.
Possession can be taken before the compensation settlement is agreed.
However, when a compensation figure is settled, interest on the figure agreed is paid by the local authority from the first date of possession. The rate of interest is the rate at which the authority on the date of such entry could borrow from the ‘local funds loan’ ie from central funds. The rate is fixed at the date of entry.
I assume you have engaged the services of a valuer and surveyor by this stage who have given you an assessment as to the level of compensation that might be obtained. The landowner is entitled to the market value of their land at the date of the Notice to Treat (the formal step in the CPO committing the local authority to proceed with the acquisition) which can include existing use value and development value.
Where existing use value is being claimed, the landowner may be entitled to compensation for disturbance and severance. Compensation for injurious affection – which is a reduction in the market value of a landowner’s remaining property caused by the project – may form part of the claim where the completed project has a negative effect on the value of the retained land.
Arbitration
An arbitrator is appointed when parties cannot reach an agreement. The arbitrator can only make a decision on compensation. An unconditional offer can be accepted at any point by the landowner before the arbitrator makes their decision.
The risk with not accepting is if the arbitrator’s award is less than what the local authority offered. Then the costs of the arbitration will be awarded against the landowner, unless special reasons exist not to order same.
Disposal for CGT
In the case of land disposed of to an authority with CPO powers where the disposal is not by contract, the time at which the disposal takes place is the earliest of the following dates:
The date upon which compensation is agreed.Failing agreement, the date compensation is determined by the arbitration tribunal, the date on which the authority enters on the land in pursuance of its CPO powers.In most cases the local authority enters on the land before compensation is agreed. However, it is worth considering where the disposal is under a CPO for the purpose of road building and the person making the disposal is engaged in farming, and immediately before the disposal the land was used for the purposes of farming.
Then the Capital Gains Tax (CGT) liability will not arise until the year of assessment in which the compensation is received. The appropriate rate of charge, however, is the rate in place at the time of disposal and not the rate in place at the time the compensation is received.
If the owner of the land is 55 years or over at the date of disposal and if they have owned and farmed the land for 10 years prior to the disposal, they can potentially claim Retirement Relief.
If the land is leased out, they can still claim the relief, provided the land was farmed for 10 years prior to the first lease, and further that each lease is for a minimum period of five years (rather than conacre basis) and has not been leased for 25 years or more.
The extent of the relief is limited depending on the age of the owner. If the owner is aged between 55 - 65 years at the date of disposal, the relief is capped at €750,000. If they dispose of the property at 66 years or over, the relief is capped at €500,000.
Another option would be to claim Entrepreneur Relief. This reduces the level of tax from 33% to 10%. There is a lifetime limit of €1m on the gains that you can claim relief on, and this limit increases to €1.5m, effective from 1 January 2026. The owner of the land must have owned the assets for a continuous period of three years.
The three years must be in the five years immediately prior to the disposal. The business asset must be used for a qualifying business such as farming. The relief does not apply to development land or assets owned personally outside a company, even where such assets are used by the company.
While many farmers are availing of Restructuring Relief to ‘roll over’ CGT where they are consolidating their landholding, the guidance specifically provides that the change of ownership of land by virtue of a CPO is not the sale or purchase of qualifying land for farm restructuring purposes.
Aisling Meehan, agricultural solicitors and tax consultants.
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 and Tax Consultants does not accept responsibility for errors or omissions howsoever arising. E-mail aisling@agrisolicitors.ie
I am trying to agree compensation with a local authority regarding land taken by them under a Compulsory Purchase Order (CPO) for a road.
I am contemplating going to arbitration as I do not feel that I am getting enough. Would I be entitled to interest? What tax might I have to pay? Can they take possession before the compensation settlement is agreed?
ANSWER: The Notice of Entry gives the landowner a minimum of 14 days notice of their intention to take possession of the lands. Depending on the works programme, it may be more than 14 days before the local authority actually takes possession.
Possession can be taken before the compensation settlement is agreed.
However, when a compensation figure is settled, interest on the figure agreed is paid by the local authority from the first date of possession. The rate of interest is the rate at which the authority on the date of such entry could borrow from the ‘local funds loan’ ie from central funds. The rate is fixed at the date of entry.
I assume you have engaged the services of a valuer and surveyor by this stage who have given you an assessment as to the level of compensation that might be obtained. The landowner is entitled to the market value of their land at the date of the Notice to Treat (the formal step in the CPO committing the local authority to proceed with the acquisition) which can include existing use value and development value.
Where existing use value is being claimed, the landowner may be entitled to compensation for disturbance and severance. Compensation for injurious affection – which is a reduction in the market value of a landowner’s remaining property caused by the project – may form part of the claim where the completed project has a negative effect on the value of the retained land.
Arbitration
An arbitrator is appointed when parties cannot reach an agreement. The arbitrator can only make a decision on compensation. An unconditional offer can be accepted at any point by the landowner before the arbitrator makes their decision.
The risk with not accepting is if the arbitrator’s award is less than what the local authority offered. Then the costs of the arbitration will be awarded against the landowner, unless special reasons exist not to order same.
Disposal for CGT
In the case of land disposed of to an authority with CPO powers where the disposal is not by contract, the time at which the disposal takes place is the earliest of the following dates:
The date upon which compensation is agreed.Failing agreement, the date compensation is determined by the arbitration tribunal, the date on which the authority enters on the land in pursuance of its CPO powers.In most cases the local authority enters on the land before compensation is agreed. However, it is worth considering where the disposal is under a CPO for the purpose of road building and the person making the disposal is engaged in farming, and immediately before the disposal the land was used for the purposes of farming.
Then the Capital Gains Tax (CGT) liability will not arise until the year of assessment in which the compensation is received. The appropriate rate of charge, however, is the rate in place at the time of disposal and not the rate in place at the time the compensation is received.
If the owner of the land is 55 years or over at the date of disposal and if they have owned and farmed the land for 10 years prior to the disposal, they can potentially claim Retirement Relief.
If the land is leased out, they can still claim the relief, provided the land was farmed for 10 years prior to the first lease, and further that each lease is for a minimum period of five years (rather than conacre basis) and has not been leased for 25 years or more.
The extent of the relief is limited depending on the age of the owner. If the owner is aged between 55 - 65 years at the date of disposal, the relief is capped at €750,000. If they dispose of the property at 66 years or over, the relief is capped at €500,000.
Another option would be to claim Entrepreneur Relief. This reduces the level of tax from 33% to 10%. There is a lifetime limit of €1m on the gains that you can claim relief on, and this limit increases to €1.5m, effective from 1 January 2026. The owner of the land must have owned the assets for a continuous period of three years.
The three years must be in the five years immediately prior to the disposal. The business asset must be used for a qualifying business such as farming. The relief does not apply to development land or assets owned personally outside a company, even where such assets are used by the company.
While many farmers are availing of Restructuring Relief to ‘roll over’ CGT where they are consolidating their landholding, the guidance specifically provides that the change of ownership of land by virtue of a CPO is not the sale or purchase of qualifying land for farm restructuring purposes.
Aisling Meehan, agricultural solicitors and tax consultants.
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 and Tax Consultants does not accept responsibility for errors or omissions howsoever arising. E-mail aisling@agrisolicitors.ie
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