Farm Ireland

Saturday 16 December 2017

Couple worried about tax bill from passing on valuable family pub and farm in will

(Stock picture)
(Stock picture)

Michael Gaffney - Tax expert with KPMG

Q My husband and I own a valuable family pub and farm. We’re concerned about the inheritance tax bills which we could leave behind when we pass on the business and farm. In order to limit such bills, what tax reliefs should we be aware of when planning our will? Sarah, Co Kerry

There are four particularly important tax reliefs. The first two apply generally irrespective of whether there is a farm or business or not.

The first tax relief is very simple and important. Any assets left to the spouse of a deceased person are exempt from Irish inheritance tax (also known as Capital Acquisitions Tax or CAT).

The second important tax relief is the tax-free threshold for CAT — which is available to anyone who gets an inheritance.

The amount one can inherit tax-free under the CAT tax-free threshold will depend on the relationship between the parties. For children inheriting or getting gifts from their parents, the amount that can be inherited tax-free is €310,000 over their lifetime.

The Minister for Finance said last year that this figure might increase in future years. For inheritances between other relatives, much less can be inherited tax-free. For example, a sister can only inherit up to €32,500 tax-free from a sibling.

For farmers, a very important relief is agricultural relief. Many conditions apply to this and when they can be met, agricultural property can be valued at 10pc of its real market value for tax purposes.

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So a farm worth €500,000 can be taxed as if it were worth only €50,000. Also, a farmhouse or mansion house which is “of a character appropriate to the property” can be treated as agricultural property as can farm machinery and livestock.

Finally, for businesses generally, there is a relief called business property relief. This is similar to agricultural relief in that the business can be valued for tax purposes at only 10pc of its real value.

Like agricultural relief, many conditions apply to this tax break. Businesses which don’t qualify for the relief include those which consist wholly or mainly of one or more of the following: the making or holding of investments; or the dealing of currencies, securities, stocks or shares, land or buildings.

However, unlike agricultural relief, shares in a company that owns the business can qualify for tax relief.


While we will endeavour to place your questions withthe most appropriate expert for your query, thiscolumn is not intended to replace professional advice

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