Question: I have recently been served with a Notice to Treat on my lands. I am concerned about the level of tax I will pay. Can you set out any available reliefs?
Answer: Notice to Treat gets served to all people involved in a CPO (compulsory purchase order). These are the people whose lands or properties are included in the CPO. They generally occur when a public infrastructure project needs to go ahead in a certain area (a motorway, for example).
It is worth setting out the steps involved in a CPO to determine when the tax liability might arise. These are generally as follows:
• A statutory body decides to make a compulsory purchase order.
• Affected parties will be served with a notice and newspaper notices will be published, stating that the Order is about to be put on public display and submitted to An Bord Pleanala for confirmation.
• Objections can be made, but valid objections are generally on planning or legal grounds only.
• A public enquiry is held at which affected parties can formally put their views forward. If no objections are made An Bord Pleanala can confirm, amend or reject the CPO without a Public Enquiry.
• An Bord Pleanala either confirms, amends or rejects CPO order and publishes details of the decisions in this regard.
• After expiry of objection period the CPO is operative.
• The Acquiring Authority serves Notice to Treat on the affected parties and discussions commence regarding the level of compensation available.
• The affected party lodges a claim for compensation. This can be made by the claimant’s valuer.
• On reaching agreement, compensation is paid. Otherwise the matter may be referred by either party to the Property Arbitrator to assess compensation.
• Acquisition is finalised and compensation paid.
Date of Disposal for Capital Gains Tax (CGT)
In the case of land disposed of to an authority with CPO powers where the disposal is not by contract, the time at which the disposal takes place is the earliest of the following dates:
• The date upon which compensation is agreed.
• Failing agreement, the date compensation is determined by the arbitration tribunal.
• The date on which the authority enters on the land in pursuance of its CPO powers.
In most cases the local authority enters on the land before compensation is agreed. However where the disposal is under a CPO for the purpose of road building and the person making the disposal is engaged in farming and immediately before the disposal the land was used for the purposes of farming, the CGT liability will not arise until the year of assessment in which the compensation is received. The appropriate rate of charge however is the rate in place at the time of disposal and not the rate in place at the time the compensation is received.
Tax Reliefs Available
If the owner of the land is 55 years or over at the date of disposal and if they have owned and farmed the land for 10 years prior to the disposal, they can potentially claim Retirement Relief.
If the land is leased out, they can still claim the relief provided the land was farmed for 10 years prior to the first lease and, further, that each lease is for a minimum period of five years (rather than conacre basis) and has not been leased for 25 years or more. The extent of the relief is limited depending on the age of the owner. If the owner is aged between 55-65 years at the date of disposal, the relief is capped at €750,000. If they dispose of the property at 66 years or over, it is capped at €500,000.
Another option would be to claim Entrepreneur Relief. This reduces the level of tax from 33% to 10%. There is a lifetime limit of €1 million on the gains that you can claim relief on. The owner of the land must have owned the assets for a continuous period of three years. The three years must be in the five years immediately prior to the disposal. The business asset must be used for a qualifying business such as farming. The relief does not apply to development land or assets owned personally outside a company, even where such assets are used by the company.
While many farmers are availing of Restructuring Relief to ‘roll over’ CGT where they are consolidating their landholding, the guidance specifically provides that the change of ownership of land by virtue of a Compulsory Purchase Order (CPO) is not the sale or purchase of qualifying land for Farm Restructuring purposes.
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. Aisling is a qualified solicitor and tax consultant.