Capital Acquisitions Tax (Gift Tax) – where no Relief is available
Transfers of property, including family farms are subject to gift tax and the tax is charged on the current market value of the farm. There is a current life time tax free threshold of €310,000.00 (since 12th October 2016) for a son or daughter, so all gift/inheritances taken since 1991 are taken into account: AN EXAMPLE 2017 –
50 acres at €10,000 per acre €500,000
Plus any other gift or inheritance since 1991 from mother or father Nil
Less current tax free threshold at……………………… ……………..…. (€310,000)`
Nett €190,000 x 33% = €62,700
Farmer Relief
There is a gift tax relief that can be used to transfer agricultural assets called “agricultural relief”. This reduces the value of the land to 10% of its actual value i.e. on the example above
€500,000 less 90% = €50,000 – no tax this only applies where the person getting the farm is deemed to be a “farmer”. “Farmer” in this context is actually a financial test. It means a person whose farming assets (including the value of the current gift) exceed 80% of their total assets.
To pass the Farmer Test on the example above the son or daughter could only have €125,000 worth of non-agricultural assets besides this transfer of farm land. The farmer relief will be withdrawn:
If property is sold within six years and not replaced by another agricultural property with one year
If the property is compulsorily purchased within six years and not replaced within six years.
In addition, the beneficiary must
• Have an agricultural qualification
Or
• Farm the agricultural property for not less than 50% of his or her normal working time.
The agricultural property must also be farmed on a commercial basis and with a view to the
Realisation of profits – thus confining the relief to genuine farmers. If a beneficiary initially
Leases the agricultural property and decides, within the 6 year period, to end the lease (provided the
Lessee agrees) and to personally farm the agricultural property, relief will not be withdrawn.
“Normal Working Time” Test. Revenue will accept, for the purposes of this relief, that “normal
Working time” (including on-farm and off-farm working time) approximates to 40 hours per week.
This will enable farmers with off-farm employment to qualify for the relief provided they spend a
Minimum of 20 hours working per week, averaged over a year, on the farm. If a farmer can show
That his or her “normal working time” is somewhat less than 40 hours a week, then the 50%
Requirement will be applied to the actual hours worked – subject to being able to show that the farm
Is farmed on a commercial basis and with a view to the realisation of profits.
If a beneficiary does not qualify for Agricultural Relief, then agricultural property may qualify for
Business Relief in certain circumstances.
There are a myriad of taxes and issues which must be considered when transferring land, outside the scope of this article ie stamp duty, capital gains tax, income tax. It is important that detailed legal and tax advice is considered prior to any transfer and we would be happy to meet and advise you.
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