Capital acquisitions tax (CAT) is an important consideration when deciding how best to transfer assets to the next generation. A son or daughter can receive gifts and inheritances of up to €320,000 from their parent before having to pay CAT. However, the balance of the gift or inheritance is then liable for CAT at 33%.
For some high-net-worth individuals, purchasing agricultural property can be a tax-efficient method of passing assets on to a son or daughter. This is because agricultural property may qualify for certain CAT reliefs which, with appropriate planning, can reduce or even eliminate your child’s CAT liability.
Agricultural relief
This relief reduces the taxable value of agricultural property for CAT purposes by 90%. So, if you bought agricultural land for €3.2m, you could pass this on to your son or daughter by way of gift or inheritance with no CAT due, provided that your son or daughter holds the land for six years and meets the agricultural relief requirements.
Once the six-year requirement is up, if they choose to dispose of the land, they will only pay tax on the uplift in value.
For some high-net-worth individuals, purchasing agricultural property can be a tax-efficient method of passing assets on to a son or daughter
To qualify for agricultural relief, your son or daughter must either lease the property to someone who farms it on a commercial basis for at least six years or farm the property themselves on a commercial basis for at least six years.
If they choose to farm the land themselves, they will need to have an appropriate agricultural qualification and must farm for at least 50% of their normal working hours.
In addition, the value of the agricultural property must make up 80% of their total property value on the valuation date – the date on which the market value of a gift or inheritance is established. The market value is the best price the property would achieve if sold on the open market.
Agricultural relief can be clawed back if your son or daughter ceases to farm the property for at least 50% of their working hours, or does not farm the property on a commercial basis for at least six years, or sells within six years of receiving the gift or inheritance and does not replace the property with other agricultural property within one year of the sale (six years if the sale was due to compulsory acquisition).
Seek advice
CAT can be a heavy burden for your children if you fail to plan ahead. There is a solution for everything once you discuss matters with your accountant in good time.
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Capital acquisitions tax (CAT) is an important consideration when deciding how best to transfer assets to the next generation. A son or daughter can receive gifts and inheritances of up to €320,000 from their parent before having to pay CAT. However, the balance of the gift or inheritance is then liable for CAT at 33%.
For some high-net-worth individuals, purchasing agricultural property can be a tax-efficient method of passing assets on to a son or daughter. This is because agricultural property may qualify for certain CAT reliefs which, with appropriate planning, can reduce or even eliminate your child’s CAT liability.
Agricultural relief
This relief reduces the taxable value of agricultural property for CAT purposes by 90%. So, if you bought agricultural land for €3.2m, you could pass this on to your son or daughter by way of gift or inheritance with no CAT due, provided that your son or daughter holds the land for six years and meets the agricultural relief requirements.
Once the six-year requirement is up, if they choose to dispose of the land, they will only pay tax on the uplift in value.
For some high-net-worth individuals, purchasing agricultural property can be a tax-efficient method of passing assets on to a son or daughter
To qualify for agricultural relief, your son or daughter must either lease the property to someone who farms it on a commercial basis for at least six years or farm the property themselves on a commercial basis for at least six years.
If they choose to farm the land themselves, they will need to have an appropriate agricultural qualification and must farm for at least 50% of their normal working hours.
In addition, the value of the agricultural property must make up 80% of their total property value on the valuation date – the date on which the market value of a gift or inheritance is established. The market value is the best price the property would achieve if sold on the open market.
Agricultural relief can be clawed back if your son or daughter ceases to farm the property for at least 50% of their working hours, or does not farm the property on a commercial basis for at least six years, or sells within six years of receiving the gift or inheritance and does not replace the property with other agricultural property within one year of the sale (six years if the sale was due to compulsory acquisition).
Seek advice
CAT can be a heavy burden for your children if you fail to plan ahead. There is a solution for everything once you discuss matters with your accountant in good time.
Read more
Land Price Report: how do Irish prices compare with Europe?
Long read: steady prices but high uncertainty in Ireland's land market
Land Price Report: don't get caught in an auction fix
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