Advice: Clarity emerging at last on Agricultural Relief conditions

Revenue have moved to clear up the confusion about the 'active farmer' test

Confusion: The 'active farmer' test for Agricultural Relief is about who farms the land, their qualifications and the amount of time they spend farming
Confusion: The 'active farmer' test for Agricultural Relief is about who farms the land, their qualifications and the amount of time they spend farming

Martin O'Sullivan

The vast majority of correspondence I receive on foot of my articles relate to some aspect or other of farm succession.

Needless to say, queries about the potential tax issues are top of the list and the 2014 Finance Act changes to Capital Acquisitions Tax and, in particular, Agricultural Relief have caused many a sleepless night for both farmer and practitioner alike.

Agricultural Relief is a must, but not a given, for those who have been gifted or have inherited a farm in that it reduces the tax value of the gift or inheritance to one-tenth of the market value.

Up until December 31, 2014, all that mattered was that the successor qualified for the relief on the day he/she was deemed to have received the gift or inheritance.

What they did after that had no bearing on retaining the relief apart from the condition that they could not sell the property for a six-year period without replacing it.

That all changed from January 1, 2015, as did my life, for the reason that I have spent endless hours attempting to interpret and understand and then explain to my clients the various conditions of the revised relief, mainly due to the introduction of the 'active farmer' condition.

Being an active farmer has nothing to do with your physical fitness or state of health, but rather it is about who farms the land, their qualifications and the amount of time they spend farming.

Over the past four years, clarity has slowly emerged by way of Revenue clarification in their various briefs and guidance notes and responses to individual queries raised.

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In this article and a further one in two weeks' time, I will deal with those aspects of the legislation that have caused the greatest amount of uncertainty, concern and downright confusion.

The 8Opc test

I will not go into a detailed explanation of the 80pc test (commonly described as the 'farmer test'), but in short, I will describe it as a condition of Agricultural Relief whereby, after receiving the gift or inheritance, 80pc of the beneficiary's gross asset value must comprise agricultural assets.

Following the 2014 changes, there was some doubt as to whether the test applied on the valuation date only or for the following six years. Thankfully, Revenue have clarified this issue by confirming that the test only applies on the valuation date, i.e. the date upon which the person is deemed to have received the gift or inheritance.

A question that is regularly asked is whether it is possible to transfer assets over to a spouse in order to satisfy the 80pc test and the answer is yes, provided that there are no written conditions related to the transfer that could render it a loan.

Cash and shares

Frequently with estate planning, I encounter individuals who have substantial non-agricultural assets such as cash or, in more recent times, Plc shares.

Leaving such cash or shares in a will without any stipulation can deny the beneficiary access to Agricultural Relief, thereby creating a serious exposure to gift or inheritance tax.

However, there is a way around this potentially disastrous situation.

A beneficiary may qualify for Agricultural Relief on non-agricultural property where a gift or inheritance is made subject to the condition that it be invested in agricultural property and that the condition is satisfied within two years after the date of the gift or inheritance.

This works well in the case of inheritances, but lifetime gifts may encounter a problem if the investments or shares are subject to Capital Gains Tax on encashment or gifting.


Where the agricultural property consists of forestry, the beneficiary does not have to pass the 'farmer test' for the purposes of claiming Agricultural Relief on the actual forestry.

Furthermore, there is no obligation for the farmer to satisfy the working-time rule or the requirement to lease the plantation if the remainder of the farm is being leased to a qualified or full-time farmer.

However, the trees must be still growing on land and cannot be cut or harvested. The underlying land is subject to the farmer test, but such land is unlikely to have any value in its own right.

Solar panels

The 'active farmer' requirement will be met where a beneficiary leases land for the installation of solar panels provided that not more than half of the land comprised in the gift or the inheritance is occupied by the solar panels and ancillary equipment.

The beneficiary must also actively farm the land not occupied by solar panels or lease it to a lessee who will meet the active farmer requirements.

Small parcels of land

A frequent question that arises in relation to claiming Agricultural Relief is in regard to how small a plot of land will qualify.

Generally, claims for Agricultural Relief in relation to small acreages of land are determined by reference to the particular circumstances of each case.

In general, Revenue considers that small parcels of land of less than two acres may be too small to constitute agricultural property, but that is not to say that somewhat larger parcels will necessarily qualify.

The use of the property is fundamental to Agricultural Relief. For example, an individual inheriting three acres adjacent to their dwelling house might have greater difficulty in establishing a claim than an individual acquiring three acres that is adjoining their existing farm.

Martin O'Sullivan is the author of the ACA Farmers Handbook. He is a partner in O'Sullivan Malone and Company, accountants and registered auditors:

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