Time to take advantage of succession relief before it's too late
Agricultural and business asset breaks available
Every farmer should have a plan for how they want to transfer their assets when they decide to retire. With asset values at an all-time low, there has never been a better time to consider succession planning.
Add to that the considerable speculation that business and agricultural reliefs could be severely curtailed in future budgets and the impetus to act has rarely been greater. Here we look at some of the options using a case study of Patrick Collins, who was a farmer for many years.
Patrick took the decision to incorporate his farming trade into Collins Farm Ltd in order to avail of a lower corporation tax rate and increased pension options a number of years ago. The main assets held in the company are €200,000 cash and €20,000 of farm machinery.
This puts the total value of Collins Farm Ltd at €220,000. Patrick also holds the land and buildings from which the farm trades outside the company in his personal name. These are currently valued at €1m.
Patrick has now reached 60 years of age and would like to pass on his assets to his children in a tax-efficient manner so that they may continue the operation of the family farm. On a gift of assets, there are normally three taxes to consider; capital gains tax (CGT) for the person making the gift, and capital acquisitions tax (CAT) and stamp duty for the beneficiary. However, reliefs such as retirement and agricultural relief are available to reduce CGT and CAT.
•Retirement relief is available to farmers who have reached 55 years of age and who have held assets for 10 years and who satisfy a number of other conditions.
•Agricultural relief takes the form of a 90pc reduction in the market value of agricultural property. An individual does not need to be a farmer to avail of the relief. Instead 80pc of their assets must be farming assets.