Hot Topic #8: Agricultural Relief from Capital Acquisitions Tax

With effect from 1st January 2015 changes have been made to the conditions for agricultural relief from CAT which are designed to confine the relief to genuine farmers and ensure productive use of the agricultural property.

For gifts and inheritances taken on or after 1st January 2015 the beneficiary must satisfy the following additional conditions:

1•  Have an agricultural qualification (a qualification of the kind listed in Schedule 2, 2A or 2B of the Stamp Duties Consolidation Act 1999) or obtain such a qualification within 4 years and farms the agricultural property for a period of not less than six years on a commercial basis and with a view to the realisation of profits  … or …

2• Spend not less than 50% of his or her normal working time farming agricultural property on a commercial basis with a view to making a profit for a period of not less than six years commencing on the valuation date.

         

Alternatively, where the beneficiary leases the agricultural property, the individual to whom the property is leased must also satisfy condition 1. or 2 above.

·     • The relief only applies to "agricultural property" which is defined as "agricultural land, pasture and woodlands situated within a Member State and crops, trees and underwood growing on such land and also includes such farm buildings, farm houses and mansion houses (together with lands occupied therewith) as are of a character appropriate to the property." The relief also applies to stock and farm machinery.

· • Any milk quota attaching to lands will also qualify for reduction as part of the market value of the lands.

· • The relief only applies to agricultural property acquired by an individual, domiciled in the State, who after taking the agricultural gift or inheritance not less than 80% of his gross assets are represented by the value of agricultural property, including livestock, bloodstock and farm machinery. For gifts or inheritances taken on or after 1st February 2007 a donee is allowed to offset borrowings for the purchase, repair or improvement of on an off farm principal private residence against the value of the property for the purpose of the 80% test.

The relief is withdrawn in certain circumstances:

· •  If within 6 years of the ‘valuation date’ the beneficiary ceases to qualify as a farmer as set out above and does not lease the land to a lessee who will farm the land for the remainder of the 6 year period. Or if within six years after the date of the gift or the inheritance lands acquisition where the land was compulsorily acquired on or after 25th March 2002.

·•  If the gift or inheritance consists of development land and is disposed of in the period commencing 6 years after the date of the gift / inheritance and ending 10 years after the date there will be a partial claw back of the relief.

We advise our clients to see professional tax and legal advice as the information given is a guideline only and does not take into account client’s particular circumstances.

Information is correct as at April 2015 but is subject to change.

Michael Keville T/A MK Financial is regulated by the Central Bank of Ireland