Money Mentor: ‘what records should I keep when buying a site?’

Question: I’ve just bought a parcel of land adjoining the farm. The solicitor has dealt with most of the paperwork but my accountant mentioned I should be keeping records for tax purposes. I have the contract and the receipt for stamp duty. Is that enough, or is there more to it than that? The purchase has now gone through and the land is in my name, but I am conscious that tax issues can arise years later when assets are transferred or sold. I want to make sure I am keeping whatever documents Revenue might require in the future.

Answer: Before looking at the records you should keep, it is worth considering a few broader questions. Records are important, but they support the structure of the purchase rather than replace it.

The first question is who bought the land. Was it purchased by you personally, by a company, or through some other arrangement? This matters because the ownership structure affects available tax reliefs, how any future sale is taxed and the flexibility available later. If the land is held in the wrong name, keeping good records will not solve that problem.

The second question is whether anyone else is involved. If a son or daughter helped fund the purchase, or if there is an intention that they will eventually farm or own the land, that can affect future succession planning. Agricultural Relief, which can reduce or eliminate inheritance tax on a farm transfer, depends on the facts being right from the outset. It cannot be added in later if the structure was wrong from the beginning.

What was purchased?

Land transactions often include more than land alone. There may be farm entitlements, buildings or even a residence. Each can have different tax treatment and may need to be tracked separately. If everything was included under a single purchase price, it may be necessary to establish how that price should be apportioned between the different assets.

The previous use of the property can also matter. If the land was let before the sale or generated income for the previous owner, there may be issues around how income is allocated up to the completion date. These are points worth discussing with your accountant while the transaction is still fresh.

Beyond the purchase costs, you need to separate what you spend on the land going forward into capital improvements and routine maintenance and repairs

Then there is the question of how you paid for it. Whether the funding came from personal borrowings, company borrowings or a combination of both, it can have tax implications. Where individuals and companies are involved in the same transaction, the paperwork should clearly reflect how funds moved and why. This can help avoid future questions around interest deductibility, loans between connected parties or potential benefit-in-kind issues.

Now, to your actual question. Yes, records matter, but they matter because of everything above, not instead of it. The purchase price, stamp duty and legal costs together form the base cost of the land for Capital Gains Tax purposes. If you eventually sell the land, these costs help reduce the taxable gain. If records are missing, you may end up paying tax on a larger profit than necessary.

You should also keep records of expenditure on the land after purchase.

It is important to distinguish between capital improvements and routine repairs or maintenance.

Beyond the purchase costs, you need to separate what you spend on the land going forward into capital improvements and routine maintenance and repairs. Capital improvements – fencing, drainage, buildings – can be added to the base cost and will reduce the taxable profit on a future sale. Repairs cannot. It sounds simple, but it is a distinction that gets blurred over years of ongoing spend, and if you cannot provide evidence, Revenue will not give you the benefit of the doubt.

Keeping record

Finally, good records are your best defence if Revenue ever reviews the transaction or a future sale. Revenue will want to understand who bought the land, how it was funded, what assets were acquired and what documentation supports those facts.

If you can clearly answer those questions and produce the relevant paperwork, you are in a strong position. If you cannot, Revenue may form its own view based on the available information.

Buying land is not simply a transaction; it is a long-term asset with tax consequences that may not arise for many years. The key is ensuring that both the structure of the purchase and the supporting records are correct from the outset.

If you have not already done so, sit down with your accountant while the details are still fresh.

Marty Murphy is head of tax at ifac, the professional services firm for farming, food and agribusiness.