The purchase of large tracts of agricultural land by extremely wealthy individuals and businesses in recent years has unsettled farmers and led to calls from the farm organisations for action to be taken by the Government.
But what levers are available to the Government to limit such activity?
A number of options exist to try and disincentivise large entities acquiring and hoarding agricultural land.
However, any restrictions introduced cannot hit demand for land or land prices. The measures must also be structured in such a fashion that individual farmers can still purchase land and grow their businesses.
This is a delicate and tricky balance, but there are possible avenues open to any future Government that has an appetite to take on the challenge.
The first one to look at would be a re-introduction of a probate tax on estate assets over a certain value – say, €10m.
This tax was there previously under the reign of Charlie McCreevey.
This could be introduced at say 2%, with rates increasing to 5% where land was valued at over €20m.
A €10m threshold would mean that a farm of around 660ac - valued at €15,000/ac – would be exempt from the measure.
For a landowner with 10,000ac valued at €15,000/ac, or €150m, this measure would result in a possible charge on the death of the owner of €6.7m.
Stamp duty is a tax on a transaction and land attracts a tax at the rate of 7.5%. Recently, the budget increased the rate of duty to 15% on multi-unit residential purchases.
This leaves an option to bring a tiered rate on land purchases, where the rate would increase based on the cumulative value of purchases.
For example, where land owned or acquired is in excess of €10m, then stamp duty could apply as follows:
Up to €10m, the rate would be 7.5%.The rate would increase by 2.5% for every €1m above €10m.And anything above a cumulative €14m would incur a rate of 17.5%.This would increase the cost of purchase by €100,000 on every €1m spent. In addition, the consanguinity relief on transfer to children should be limited to a ceiling of say, €1.5m, in value. Consanguinity relief limits the rate of duty to 1% on transfers to children or blood relatives.
Moreover, the rate of duty on a company share transfer deriving its value from non-development land is liable to duty at 1%.
The cumulative value approach could apply and these shares would be liable to duty at the same rate as those of an individual from 7.5% to 17.5%.
While not stopping land purchases, it would help to disincentivise the hoarding by adding a significant cost.
Annual land
value-based tax
A lot has been written and discussed on the residential land tax where zoned land with access to services will be liable to an annual tax at the rate of 3% of its market value. Why not consider bringing in a land-value tax on total holdings held by connected parties with a value above €10m? The tax could be set at say 2%.
This would be the equivalent of rates and would be payable to the local authority on an annual basis.
For an individual or business with 10,000ac valued at €150m, this would equate to an annual charge of €2.8m.
Capital gains tax (CGT) is a tax on the profit when you sell property that has increased in value. The rate is at 33% of the increase in value with various reliefs available to mitigate this liability.
On a lifetime transfer, limits to the relief apply on both age and value grounds. A new unlimited value-based retention period of 12 years for someone under 70 is being introduced.
No CGT applies on death and an option exists to tax the gain on death and have the option of offsetting this liability against whatever Inheritance tax would be due, ensuring a level of tax would be payable.
The 2022 commission on taxation recommended that it should apply on a death. However, it proposed that reliefs applying on a lifetime transfer should also apply on a death - but with limits.
Taking a property of 10,000ac valued at €150m, a person receiving this property could ensure no capital gain if they hold the lands for 12 years.
Capital acquisitions tax (CAT) applies to the person receiving the asset – who is termed the beneficiary – and large beneficiary reliefs apply.
Unlimited agricultural relief and business relief applies; and again, the 2022 commission on taxation recommended the level of relief be amended.
At present, the relief is 90% meaning that a person can take over a business or farm worth €4m and, with the increase of the threshold to €400,000, have no gift or inheritance tax liability.
With the unlimited level of relief, a gift/inheritance of €10m would only attract a liability of €200,000.
Some changes have been made in the recent budget that will help in that a gift of cash conditional on investment in agricultural property will no longer be available from 1 January 2025.
However, a further review of reliefs could apply. Up to 1994, there was an upper threshold or ceiling on the maximum amount of relief that could apply and property was reduced by 75% or £250,000, whichever was the lesser.
A further option exists in that 90% relief could apply up to the threshold of €400,000 or an asset valued at €4m.
A reducing rate of relief would apply above this threshold for each €1m, up to €10m.
Relief could be restricted to say 50% on anything above €10m.
A person inheriting €20m of property today would pay €528,000 in tax, whereas with this approach the liability would increase to approximately €5m.
For an individual inheriting 10,000ac valued at €150m, the liability would be €50m with no reliefs.
Declan McEvoy.
The purchase of large tracts of agricultural land by extremely wealthy individuals and businesses in recent years has unsettled farmers and led to calls from the farm organisations for action to be taken by the Government.
But what levers are available to the Government to limit such activity?
A number of options exist to try and disincentivise large entities acquiring and hoarding agricultural land.
However, any restrictions introduced cannot hit demand for land or land prices. The measures must also be structured in such a fashion that individual farmers can still purchase land and grow their businesses.
This is a delicate and tricky balance, but there are possible avenues open to any future Government that has an appetite to take on the challenge.
The first one to look at would be a re-introduction of a probate tax on estate assets over a certain value – say, €10m.
This tax was there previously under the reign of Charlie McCreevey.
This could be introduced at say 2%, with rates increasing to 5% where land was valued at over €20m.
A €10m threshold would mean that a farm of around 660ac - valued at €15,000/ac – would be exempt from the measure.
For a landowner with 10,000ac valued at €15,000/ac, or €150m, this measure would result in a possible charge on the death of the owner of €6.7m.
Stamp duty is a tax on a transaction and land attracts a tax at the rate of 7.5%. Recently, the budget increased the rate of duty to 15% on multi-unit residential purchases.
This leaves an option to bring a tiered rate on land purchases, where the rate would increase based on the cumulative value of purchases.
For example, where land owned or acquired is in excess of €10m, then stamp duty could apply as follows:
Up to €10m, the rate would be 7.5%.The rate would increase by 2.5% for every €1m above €10m.And anything above a cumulative €14m would incur a rate of 17.5%.This would increase the cost of purchase by €100,000 on every €1m spent. In addition, the consanguinity relief on transfer to children should be limited to a ceiling of say, €1.5m, in value. Consanguinity relief limits the rate of duty to 1% on transfers to children or blood relatives.
Moreover, the rate of duty on a company share transfer deriving its value from non-development land is liable to duty at 1%.
The cumulative value approach could apply and these shares would be liable to duty at the same rate as those of an individual from 7.5% to 17.5%.
While not stopping land purchases, it would help to disincentivise the hoarding by adding a significant cost.
Annual land
value-based tax
A lot has been written and discussed on the residential land tax where zoned land with access to services will be liable to an annual tax at the rate of 3% of its market value. Why not consider bringing in a land-value tax on total holdings held by connected parties with a value above €10m? The tax could be set at say 2%.
This would be the equivalent of rates and would be payable to the local authority on an annual basis.
For an individual or business with 10,000ac valued at €150m, this would equate to an annual charge of €2.8m.
Capital gains tax (CGT) is a tax on the profit when you sell property that has increased in value. The rate is at 33% of the increase in value with various reliefs available to mitigate this liability.
On a lifetime transfer, limits to the relief apply on both age and value grounds. A new unlimited value-based retention period of 12 years for someone under 70 is being introduced.
No CGT applies on death and an option exists to tax the gain on death and have the option of offsetting this liability against whatever Inheritance tax would be due, ensuring a level of tax would be payable.
The 2022 commission on taxation recommended that it should apply on a death. However, it proposed that reliefs applying on a lifetime transfer should also apply on a death - but with limits.
Taking a property of 10,000ac valued at €150m, a person receiving this property could ensure no capital gain if they hold the lands for 12 years.
Capital acquisitions tax (CAT) applies to the person receiving the asset – who is termed the beneficiary – and large beneficiary reliefs apply.
Unlimited agricultural relief and business relief applies; and again, the 2022 commission on taxation recommended the level of relief be amended.
At present, the relief is 90% meaning that a person can take over a business or farm worth €4m and, with the increase of the threshold to €400,000, have no gift or inheritance tax liability.
With the unlimited level of relief, a gift/inheritance of €10m would only attract a liability of €200,000.
Some changes have been made in the recent budget that will help in that a gift of cash conditional on investment in agricultural property will no longer be available from 1 January 2025.
However, a further review of reliefs could apply. Up to 1994, there was an upper threshold or ceiling on the maximum amount of relief that could apply and property was reduced by 75% or £250,000, whichever was the lesser.
A further option exists in that 90% relief could apply up to the threshold of €400,000 or an asset valued at €4m.
A reducing rate of relief would apply above this threshold for each €1m, up to €10m.
Relief could be restricted to say 50% on anything above €10m.
A person inheriting €20m of property today would pay €528,000 in tax, whereas with this approach the liability would increase to approximately €5m.
For an individual inheriting 10,000ac valued at €150m, the liability would be €50m with no reliefs.
Declan McEvoy.
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