Transferring the farm before you die

If you transfer your farm before you die, you are liable for Capital Gains Tax on any gains that you make. However, if you are under 66 and passing the farm on to a family member, you may qualify for unlimited CGT relief subject to certain conditions. If you are over 66, this relief is capped at €3m.

Transfers to non-family members may also qualify for CGT relief. If you are under 66, you can claim full relief if the market value at the time of transfer does not exceed €750,000. This threshold is €500,000 if you are over 66.

If you have a successor — whether a family member or another person — entering into a Succession Registered Farm Partnership can be a tax efficient way to prepare for succession as it provides an income tax credit of €5,000 for up to five years, allocated on a profit-sharing ratio between a qualifying farmer and his/her successor.

If you do intend to sell your farm prior to retirement, you may be able to claim Retirement Relief. This can potentially eliminate your CGT liability if you satisfy the relevant conditions. Alternatively, where applicable, Entrepreneur Relief reduces the CGT rate to 10%.

There is no CGT on transferring land to your child for a house that will be your child’s main residence.

Succession after death

If succession happens after your death, the person who inherits your farm will be liable for Capital Acquisitions Tax (33%). Individuals can receive gifts and inheritances up to a set value over their lifetime before having to pay CAT. On parent to child transfers, the CAT threshold is €335,000. A nephew or niece who has worked full-time on your farm can qualify as your ‘child’ in certain circumstances. Inheritances by a spouse or civil partner are exempt from CAT.

Where applicable, Agricultural Relief or Business Relief potentially reduces the taxable value of inheritances by 90%.

Stamp duty

Stamp duty also needs to be considered when planning for succession. Transfers between spouses, are exempt. On other farm transfers, the available reliefs include:

1 Consanguinity Relief which reduces stamp duty from 6% to 1% and

2 Young Trained Farmer Relief which provides full relief on qualifying transfers up to 31 December 2021.

Note that there is a cumulative lifetime cap of €70,000 on the amount of tax relief that a young trained farmer can claim for Stamp Duty Relief, stock relief and the succession farm partnerships tax credit.

Retirement income

When planning for succession, it is important not to neglect your retirement income. Currently, many farmers rely on the State Pension, however this may not be sufficient to meet your needs.

At the time of writing, to qualify for the maximum Contributory State pension (€248.30 per week) you must have a yearly average of 48 PRSI contributions or more per annum (or at least 2,080 aggregated contributions). If your contributions are less than this, your weekly payment will be reduced.

The Non-Contributory State Pension is means-tested. Currently, the maximum personal weekly rate for a person aged over 66 and under 80 is €237. If you are over 80, the rate is €247.

With changes to Ireland’s pension regime on the horizon, it is prudent to look at other ways to fund your retirement. Contributing to a personal pension can be a tax-efficient way to achieve this.

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