Myself and my partner are interested in buying a small farm that comes with a derelict cottage. My partner’s mother has offered to gift us the cash to make the purchase. I am a young trained farmer under 35 years.
My partner is over 35 and has no agricultural qualifications. I own a house that was gifted to me from my parents but I plan on selling it and doing up the derelict farmhouse. I was hoping to apply for the derelict housing grant from the council to help towards the renovation cost. Have you any advice on how to structure our business legally to take best advantage of tax saving mechanisms?
Answer: I’ll be honest – structuring your assets is made more difficult by the fact that you are not married. That said, it should not be the driver for a proposal so we will look at alternative ways to achieve a tax efficient ownership and operating structure.
Stamp duty
The standard rate of stamp duty of 7.5% applies to land transfers by deed. For example, the purchase of a farm worth €400,000 would generate a €30,000 stamp duty bill. The Young Trained Farmer Stamp Duty Relief reduces this to €0.
To qualify, the purchaser must:
Be under 35 at the transfer date. Hold the Green Cert (or obtain it within three years after paying duty upfront, then claim a refund within four years). Farm at least 50% of their working time for five years. Complete My Farm, My Plan with Teagasc before the purchase. Consequently, the land needs to be purchased in your sole name if you wish to save on the €30,000 stamp duty liability. If you were married, it could be purchased in both your names and you would qualify for the stamp duty relief.
Gift/Inheritance Tax
Children can inherit up to €400,000 tax-free from parents. Strangers in blood (anyone that’s not a lineal descendent) can be gifted/inherit up to €20,000. Any gift or inheritance in excess of these limits are taxable at 33%. So the question now arises as to how you are going to get the cash over from your partner’s mother without incurring a gift tax liability (CAT).
Your partner can get up to €400,000 from his mother without incurring any gift tax (CAT). If he gives you anything more than €20,000, you pay gift tax at 33% on anything in excess of €20,000 plus the annual small gift exemption of €3,000 per annum. So if he or his mother gives you €400,000 for example you will pay gift tax of €124,410.
However, if you were able to sell an asset to your partner for this amount, this would avoid or reduce the gift tax liability. For example, say your house was worth €400,000 and you were to sell this to your partner, you could avail of Principal Private Residence relief, meaning that you would have no Capital Gains Tax to pay on the sale of your house to your partner.
Assuming the market value of the house was €400,000 and your partner pays you this amount, there is no gift so no exposure to gift tax (CAT). Your partner will pay 1% stamp duty on the purchase price ie €4,000 and he will now own the house. However, you now have €400,000 in cash which you can now use to buy the land in your sole name and avail of the Young Trained Farmer Stamp Duty exemption, saving you €30,000 in stamp duty on the purchase.
Vacant Property
Refurbishment Grant (VPRG)
In order to qualify for the VPRG grant of up to €70,000 for a derelict or vacant property, you must intend to occupy the derelict property as your principal private residence after refurbishment, generally for at least five years. Local authorities administer the grant so always check with them before applying.
National Reserve Entitlements and Young Farmer Top Up
If you purchased ‘naked’ land (land without entitlements), you should be able to apply for new entitlements under the National Reserve worth approximately €154 per entitlement, ie 16 entitlements generates an annual payment of €2,464 per annum. You should also be able to avail of the Young Farmer Top Up of approximately €170 per ha. Multiplied by 16ha equals €2,720 per annum. Over five years, this adds up to €13,600 of a top up to your entitlements.
60% TAMS Grant
A young trained farmer holding the Green Cert qualifies for a 60% TAMS grant on a €90,000 spend under the Young Farmer Capital Investment Scheme. Female farmers aged 18-66 may also access the 60% grant if they were on the herd number in 2022 or meet qualification requirements such as the Green Cert.
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
Myself and my partner are interested in buying a small farm that comes with a derelict cottage. My partner’s mother has offered to gift us the cash to make the purchase. I am a young trained farmer under 35 years.
My partner is over 35 and has no agricultural qualifications. I own a house that was gifted to me from my parents but I plan on selling it and doing up the derelict farmhouse. I was hoping to apply for the derelict housing grant from the council to help towards the renovation cost. Have you any advice on how to structure our business legally to take best advantage of tax saving mechanisms?
Answer: I’ll be honest – structuring your assets is made more difficult by the fact that you are not married. That said, it should not be the driver for a proposal so we will look at alternative ways to achieve a tax efficient ownership and operating structure.
Stamp duty
The standard rate of stamp duty of 7.5% applies to land transfers by deed. For example, the purchase of a farm worth €400,000 would generate a €30,000 stamp duty bill. The Young Trained Farmer Stamp Duty Relief reduces this to €0.
To qualify, the purchaser must:
Be under 35 at the transfer date. Hold the Green Cert (or obtain it within three years after paying duty upfront, then claim a refund within four years). Farm at least 50% of their working time for five years. Complete My Farm, My Plan with Teagasc before the purchase. Consequently, the land needs to be purchased in your sole name if you wish to save on the €30,000 stamp duty liability. If you were married, it could be purchased in both your names and you would qualify for the stamp duty relief.
Gift/Inheritance Tax
Children can inherit up to €400,000 tax-free from parents. Strangers in blood (anyone that’s not a lineal descendent) can be gifted/inherit up to €20,000. Any gift or inheritance in excess of these limits are taxable at 33%. So the question now arises as to how you are going to get the cash over from your partner’s mother without incurring a gift tax liability (CAT).
Your partner can get up to €400,000 from his mother without incurring any gift tax (CAT). If he gives you anything more than €20,000, you pay gift tax at 33% on anything in excess of €20,000 plus the annual small gift exemption of €3,000 per annum. So if he or his mother gives you €400,000 for example you will pay gift tax of €124,410.
However, if you were able to sell an asset to your partner for this amount, this would avoid or reduce the gift tax liability. For example, say your house was worth €400,000 and you were to sell this to your partner, you could avail of Principal Private Residence relief, meaning that you would have no Capital Gains Tax to pay on the sale of your house to your partner.
Assuming the market value of the house was €400,000 and your partner pays you this amount, there is no gift so no exposure to gift tax (CAT). Your partner will pay 1% stamp duty on the purchase price ie €4,000 and he will now own the house. However, you now have €400,000 in cash which you can now use to buy the land in your sole name and avail of the Young Trained Farmer Stamp Duty exemption, saving you €30,000 in stamp duty on the purchase.
Vacant Property
Refurbishment Grant (VPRG)
In order to qualify for the VPRG grant of up to €70,000 for a derelict or vacant property, you must intend to occupy the derelict property as your principal private residence after refurbishment, generally for at least five years. Local authorities administer the grant so always check with them before applying.
National Reserve Entitlements and Young Farmer Top Up
If you purchased ‘naked’ land (land without entitlements), you should be able to apply for new entitlements under the National Reserve worth approximately €154 per entitlement, ie 16 entitlements generates an annual payment of €2,464 per annum. You should also be able to avail of the Young Farmer Top Up of approximately €170 per ha. Multiplied by 16ha equals €2,720 per annum. Over five years, this adds up to €13,600 of a top up to your entitlements.
60% TAMS Grant
A young trained farmer holding the Green Cert qualifies for a 60% TAMS grant on a €90,000 spend under the Young Farmer Capital Investment Scheme. Female farmers aged 18-66 may also access the 60% grant if they were on the herd number in 2022 or meet qualification requirements such as the Green Cert.
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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