Massive tax hit looming for family farm transfers
Published 14/12/2010 | 05:00
The Government has paved the way to bring the average family farm transfer into the tax net by 2012.
Changes to capital taxation measures mean that farm transfers that would never have incurred a tax bill before will become liable by 2012.
The new regulations will cost farmers thousands of euro on the transfer of ordinary farm holdings.
Minister for Finance Brian Lenihan reduced the tax-free threshold for Capital Acquisitions Tax (CAT) by 20pc from €414,799 to €331,839 in parent to child transfers last week, which will affect the transfer of farms worth more than €3m in the next 12 months.
However, farms worth significantly less will become liable for tax bills the following year. Experts have warned that farms worth over €1.3m are at risk of incurring significant tax bills from 2012.
This is due to a combination of lower CAT thresholds, the potential curtailment and/or abolition of agricultural and business reliefs from CAT in 2012 and the threat of a stamp duty charge on agricultural land transfers.
For example, take a farm (land, stock and machinery) worth €1.5m being transferred from father to son or daughter in 2012.
If the Government takes the advice of the Commission for Taxation and reduces the agricultural relief on CAT from 90pc down to 75pc, some €1.125m of the farm's value is non-taxable, leaving €375,000. The new threshold, revised for CAT, is €332,000, which leaves €43,000 to be taxed at the 25pc rate of CAT.