Dear Money Mentor
My mother is in the process of signing the family farm over to myself. It is only a small holding of land in Co Sligo and does not contain the family home.
I am assuming the transfer will be straightforward – just changing from her name into mine? I have had the land valued at €259,000.
I have a full-time job and I do not have a green cert.
I am 41 years old and married with one child. I am also wondering will there be a liability regarding stamp duty?
I have being wondering about doing the green cert course but there seems to be no places available until 2022. How can I confirm that I farm the land 50% of my time (as I also work full-time)? I have independently farmed this land for my mother for the last number of years. However, all title documents are in my mother’s name.
I would appreciate your advice on this. I find accurate information difficult to source. Some professional advice I have received is quite vague on the actual detail on some of this.
Thank you in advance,
Nick
Thank you, Nick, for your email.
Firstly, your mother is signing over the farm to you now, so the case will be treated as gift tax as opposed to inheritance tax. Gift tax applies to a lifetime transfer. You state the current valuation is €259,000. As the transfer is from mother to son the threshold (Class A parent) is applicable. This means you can receive up to €335,000 as a tax-free sum, so no Capital Acquisition Tax (CAT) will be payable.
This tax-free amount is not an annual amount but is aggregated with all gifts (non-exempt) or inheritances received since 5 Dec 1991. You don’t say how old your mother is. I’m assuming she is availing of a pension for income.
Small gift exemption
Just another thing you may not be aware of is the “small gift exemption” – in addition to this €335,000 tax-free threshold, the first €3,000 of gifts to a child in any year is exempt from CAT under the annual small gift exemption.
This means that each parent can give a gift to the value of €3,000 to a child (or anyone else) each calendar year without any CAT arising. In fact, both parents can do this. Therefore, a child can actually receive €6,000 per annum from their parents without incurring any CAT.
There is no obligation on the beneficiary of a gift to spend it in the year it is received. Gifts can be accumulated to meet future expenditure, such as a deposit on a house.
Stamp duty
Stamp duty is payable on the value of land only. The transfer of livestock, machinery and Basic Payment Entitlements are not subject to duty. I am not sure if any of these apply in your case. You didn’t say what type of farming you do. The rate of stamp duty will be determined by the following circumstances pertaining at time of transfer.
Transfers between closely related persons will attract a rate of 1% subject to the condition that you (the transferee) must farm the land for a period of not less than six years from date of execution of the transfer, or lease it to a person for a period of not less than six years who will farm it. This rate applies until 31 December 2023. Transfers between unrelated parties will attract a rate of 7.5% unless the transferee is a young trained farmer.
In your case, the stamp duty cost should be €2,590 (1%) but you will need to farm it for six years from the transfer date.
You will not qualify for the zero stamp duty (special relief for young trained farmers) as you need to be under 35 years old. The 50% working time rule also applies to this relief.
Normal working time approximates to 40 hours per week to include on-farm and off-farm working time. This allows farmers with off-farm employment to qualify for the relief, provided they spend a minimum of 20 hours working per week (averaged per year) on the farm. This is often determined by the fact the farm is farmed on a commercial basis and with a view to realisation of profits, backed up with the level of farming activity and farming records.
I hope the above is helpful to you, Nick. You would be best advised to consult with an agricultural consultant in your local area for the best advice.
Best wishes,
Margaret
‘Will my granddaughter be liable for tax on the shares I’ve willed to her?’
Dear Money Mentor,
I am a widow and I live by myself but my only son and his family live nearby. I handed over the family farm to my son in a succession plan six years ago. I own some ordinary Kerry Group plc shares which I have willed to my granddaughter on my death. Will there be any tax payable on this transaction when my granddaughter inherits them?
Many thanks,
Deirdre
Hi Deirdre,
As these shares will pass to your granddaughter on your death, there will be no Capital Gains Tax (CGT) or stamp duty payable. There may be a Capital Acquisition Tax (CAT) liability. Under the inheritance tax rules, your granddaughter is in the Group B threshold of €32,500 – the maximum amount she can inherit from a grandparent tax free.
Assuming the value of the shares falls within this threshold, no tax will be payable. If the value of the shares exceed this threshold amount, CAT will be payable at 33% on anything above €32,500. Thank you for your query.
Read more
Money Mentor - State to sell Bank of Ireland shares, AIB agrees deal with UB
Ruling in farm tax case shows legal advice is critical
Dear Money Mentor
My mother is in the process of signing the family farm over to myself. It is only a small holding of land in Co Sligo and does not contain the family home.
I am assuming the transfer will be straightforward – just changing from her name into mine? I have had the land valued at €259,000.
I have a full-time job and I do not have a green cert.
I am 41 years old and married with one child. I am also wondering will there be a liability regarding stamp duty?
I have being wondering about doing the green cert course but there seems to be no places available until 2022. How can I confirm that I farm the land 50% of my time (as I also work full-time)? I have independently farmed this land for my mother for the last number of years. However, all title documents are in my mother’s name.
I would appreciate your advice on this. I find accurate information difficult to source. Some professional advice I have received is quite vague on the actual detail on some of this.
Thank you in advance,
Nick
Thank you, Nick, for your email.
Firstly, your mother is signing over the farm to you now, so the case will be treated as gift tax as opposed to inheritance tax. Gift tax applies to a lifetime transfer. You state the current valuation is €259,000. As the transfer is from mother to son the threshold (Class A parent) is applicable. This means you can receive up to €335,000 as a tax-free sum, so no Capital Acquisition Tax (CAT) will be payable.
This tax-free amount is not an annual amount but is aggregated with all gifts (non-exempt) or inheritances received since 5 Dec 1991. You don’t say how old your mother is. I’m assuming she is availing of a pension for income.
Small gift exemption
Just another thing you may not be aware of is the “small gift exemption” – in addition to this €335,000 tax-free threshold, the first €3,000 of gifts to a child in any year is exempt from CAT under the annual small gift exemption.
This means that each parent can give a gift to the value of €3,000 to a child (or anyone else) each calendar year without any CAT arising. In fact, both parents can do this. Therefore, a child can actually receive €6,000 per annum from their parents without incurring any CAT.
There is no obligation on the beneficiary of a gift to spend it in the year it is received. Gifts can be accumulated to meet future expenditure, such as a deposit on a house.
Stamp duty
Stamp duty is payable on the value of land only. The transfer of livestock, machinery and Basic Payment Entitlements are not subject to duty. I am not sure if any of these apply in your case. You didn’t say what type of farming you do. The rate of stamp duty will be determined by the following circumstances pertaining at time of transfer.
Transfers between closely related persons will attract a rate of 1% subject to the condition that you (the transferee) must farm the land for a period of not less than six years from date of execution of the transfer, or lease it to a person for a period of not less than six years who will farm it. This rate applies until 31 December 2023. Transfers between unrelated parties will attract a rate of 7.5% unless the transferee is a young trained farmer.
In your case, the stamp duty cost should be €2,590 (1%) but you will need to farm it for six years from the transfer date.
You will not qualify for the zero stamp duty (special relief for young trained farmers) as you need to be under 35 years old. The 50% working time rule also applies to this relief.
Normal working time approximates to 40 hours per week to include on-farm and off-farm working time. This allows farmers with off-farm employment to qualify for the relief, provided they spend a minimum of 20 hours working per week (averaged per year) on the farm. This is often determined by the fact the farm is farmed on a commercial basis and with a view to realisation of profits, backed up with the level of farming activity and farming records.
I hope the above is helpful to you, Nick. You would be best advised to consult with an agricultural consultant in your local area for the best advice.
Best wishes,
Margaret
‘Will my granddaughter be liable for tax on the shares I’ve willed to her?’
Dear Money Mentor,
I am a widow and I live by myself but my only son and his family live nearby. I handed over the family farm to my son in a succession plan six years ago. I own some ordinary Kerry Group plc shares which I have willed to my granddaughter on my death. Will there be any tax payable on this transaction when my granddaughter inherits them?
Many thanks,
Deirdre
Hi Deirdre,
As these shares will pass to your granddaughter on your death, there will be no Capital Gains Tax (CGT) or stamp duty payable. There may be a Capital Acquisition Tax (CAT) liability. Under the inheritance tax rules, your granddaughter is in the Group B threshold of €32,500 – the maximum amount she can inherit from a grandparent tax free.
Assuming the value of the shares falls within this threshold, no tax will be payable. If the value of the shares exceed this threshold amount, CAT will be payable at 33% on anything above €32,500. Thank you for your query.
Read more
Money Mentor - State to sell Bank of Ireland shares, AIB agrees deal with UB
Ruling in farm tax case shows legal advice is critical
This is a subscriber-only article
SHARING OPTIONS: