“I have been encouraged to take over the farm before the end of the year for fear of changes in the budget. Is this scare mongering or do you think it is likely that changes will be made to the reliefs?”
With Budget 2024 just around the corner on 10 October, there are plenty of possible measures floating around government circles - with some reaching the public through interviews, press releases and rumour.
The Commission on Taxation and Welfare Report, which was published in September 2022, was a sobering read for many farmers and advisors. The commission placed emphasis on the importance of broadening the tax base and in particular recommended that the share of taxes from capital and wealth should be increased. This is in the context of 2.5% of tax receipts currently coming from capital taxes.
From a Capital Gains Tax (CGT) perspective, the commission made recommendations related to the treatment of assets on a death (currently no CGT applies in a death situation), restriction on principal private residence relief and lifetime limits on disposals to children who qualify for retirement relief.
For Capital Acquisitions Tax (CAT), the commission made recommendations related to group thresholds, gifts and inheritances generally, the treatment of foster children and reductions in the availability of agricultural and business relief.
More recently, the Capital Taxes and Stamp Duty Strategy Group issued a paper in July 2023, which emphasised that the department will, over the medium to long-term, consider the wider range of issues highlighted by the Commission on Taxation. In particular, the recommendations regarding specific reliefs will be considered as each of these reliefs falls due for their periodic review. So, we have been warned.
Stamp Duty Consanguinity Relief
This valuable relief is due to expire on 31 December, 2023 and was specifically mentioned in the paper issued in July 2023. The value of this relief is that instead of a child/niece/nephew/close relative having to pay 7.5% on stamp duty on a farm transfer, they can qualify for a 1% stamp duty rate.
Of course, there is also the 0% Young Trained Farmer Stamp Duty relief, but this is dependent on the child/niece/nephew having the Green Cert, being under 35 years of age and committing to farm the land for 50% of their time for five years from the date of the transfer. If they are unable to satisfy any of these conditions, they would be faced with a 7.5% stamp duty rate unless they can avail of Consanguinity Relief.
While previously Consanguinity Relief was available to a broad range of property types, it ceased to apply to residential property as of 8 December, 2010. It then ceased to apply to all non-residential property except farmland from 1 January, 2015. Consanguinity relief is due to expire at the end of this year and as such it is currently being reviewed by the Department as to whether it should be retained beyond the current expiry date and, if so, for how long and in its current or an amended form.
It is important to highlight that prior to its last extension, there was a condition that the transferor (parent/uncle/aunt, etc) had to be younger than 67 years to avail of the relief. However, this condition was removed following intense lobbying when the stamp duty rate increased in the Finance Act 2017 from 2% to 6%. There is a risk that this age limit could be introduced again in circumstances where a policy objective is to try and get farmers to transfer land over to the next generation before they turn 67 years of age, as is evident from CGT Retirement Relief. It is no coincidence that this mirrors the state pension age.
Solar and Agricultural Relief from CAT
In order for land to qualify as agricultural property for the purposes of agricultural relief, the land must be farmed. If, however, instead of farming it, a farmer leases it to a solar company, it may be considered as no longer being farmed. That said, there is a concession within the tax legislation that once not more than 50% of the land is covered by solar, the land still qualifies as agricultural property for the purposes of the relief.
The Department paper issued in July 2023 referred to the intense lobby to either reduce the 50% limit or abolish it. However, it indicated that it would be contrary to the recommendations of the Commission on Taxation Report.
Consequently, it is unlikely that there will be changes in this budget. That said there are ways to structure farm transfers to reduce or avoid the 50% restriction in terms of how you divide up assets or acquire further land. CL
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 does not accept responsibility for errors or omissions howsoever arising. E-mail aisling@agrisolicitors.ie
Read more
Legal query: 'Am I still liable if someone gets hurt while walking on our farm?'
Legal query: what rights do I have if my husband forms a company with the farm?
“I have been encouraged to take over the farm before the end of the year for fear of changes in the budget. Is this scare mongering or do you think it is likely that changes will be made to the reliefs?”
With Budget 2024 just around the corner on 10 October, there are plenty of possible measures floating around government circles - with some reaching the public through interviews, press releases and rumour.
The Commission on Taxation and Welfare Report, which was published in September 2022, was a sobering read for many farmers and advisors. The commission placed emphasis on the importance of broadening the tax base and in particular recommended that the share of taxes from capital and wealth should be increased. This is in the context of 2.5% of tax receipts currently coming from capital taxes.
From a Capital Gains Tax (CGT) perspective, the commission made recommendations related to the treatment of assets on a death (currently no CGT applies in a death situation), restriction on principal private residence relief and lifetime limits on disposals to children who qualify for retirement relief.
For Capital Acquisitions Tax (CAT), the commission made recommendations related to group thresholds, gifts and inheritances generally, the treatment of foster children and reductions in the availability of agricultural and business relief.
More recently, the Capital Taxes and Stamp Duty Strategy Group issued a paper in July 2023, which emphasised that the department will, over the medium to long-term, consider the wider range of issues highlighted by the Commission on Taxation. In particular, the recommendations regarding specific reliefs will be considered as each of these reliefs falls due for their periodic review. So, we have been warned.
Stamp Duty Consanguinity Relief
This valuable relief is due to expire on 31 December, 2023 and was specifically mentioned in the paper issued in July 2023. The value of this relief is that instead of a child/niece/nephew/close relative having to pay 7.5% on stamp duty on a farm transfer, they can qualify for a 1% stamp duty rate.
Of course, there is also the 0% Young Trained Farmer Stamp Duty relief, but this is dependent on the child/niece/nephew having the Green Cert, being under 35 years of age and committing to farm the land for 50% of their time for five years from the date of the transfer. If they are unable to satisfy any of these conditions, they would be faced with a 7.5% stamp duty rate unless they can avail of Consanguinity Relief.
While previously Consanguinity Relief was available to a broad range of property types, it ceased to apply to residential property as of 8 December, 2010. It then ceased to apply to all non-residential property except farmland from 1 January, 2015. Consanguinity relief is due to expire at the end of this year and as such it is currently being reviewed by the Department as to whether it should be retained beyond the current expiry date and, if so, for how long and in its current or an amended form.
It is important to highlight that prior to its last extension, there was a condition that the transferor (parent/uncle/aunt, etc) had to be younger than 67 years to avail of the relief. However, this condition was removed following intense lobbying when the stamp duty rate increased in the Finance Act 2017 from 2% to 6%. There is a risk that this age limit could be introduced again in circumstances where a policy objective is to try and get farmers to transfer land over to the next generation before they turn 67 years of age, as is evident from CGT Retirement Relief. It is no coincidence that this mirrors the state pension age.
Solar and Agricultural Relief from CAT
In order for land to qualify as agricultural property for the purposes of agricultural relief, the land must be farmed. If, however, instead of farming it, a farmer leases it to a solar company, it may be considered as no longer being farmed. That said, there is a concession within the tax legislation that once not more than 50% of the land is covered by solar, the land still qualifies as agricultural property for the purposes of the relief.
The Department paper issued in July 2023 referred to the intense lobby to either reduce the 50% limit or abolish it. However, it indicated that it would be contrary to the recommendations of the Commission on Taxation Report.
Consequently, it is unlikely that there will be changes in this budget. That said there are ways to structure farm transfers to reduce or avoid the 50% restriction in terms of how you divide up assets or acquire further land. CL
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 does not accept responsibility for errors or omissions howsoever arising. E-mail aisling@agrisolicitors.ie
Read more
Legal query: 'Am I still liable if someone gets hurt while walking on our farm?'
Legal query: what rights do I have if my husband forms a company with the farm?
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