It's relief all round on tax for young farmers

The Revenue Commissioners has moved to allay young farmers' fears about how last year's budget will affect tax reliefs

Tax break: The lower rate of Stamp Duty will be paid where Young Farmer Stamp Duty relief is applied to the transfer of property and land
Tax break: The lower rate of Stamp Duty will be paid where Young Farmer Stamp Duty relief is applied to the transfer of property and land
Ciaran Moran

Ciaran Moran

Fears were raised after last year's budget that provisions in the 2019 Finance Bill could potentially see young farmers hit with massive tax bills.

The Bill introduced a cumulative €70,000 lifetime cap on the benefit any one farmer can receive under three farming related tax reliefs: the young trained farmer stamp duty relief; stock relief for young trained farmers and succession farm partnerships.

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Now, Revenue has clarified that in a case where Young Farmer Stamp Duty relief is applied to the transfer of property and land, only the lower rate of 1pc stamp duty will count towards the €70,000 limit on young farmer taxation reliefs.

Macra na Feirme says the Revenue move should finally bring clarity in the application of tax relief for farm transfers.

The following examples illustrate the operation of the €70,000 ceiling. For the most part, they focus on young trained farmer relief as this is typically more significant than the two income tax reliefs.

Unless stated otherwise in the example, the transferee is not eligible for consanguinity relief.

Single transferee with pre January 2019 purchase that exceeded ceiling

A young trained farmer claimed young trained farmer relief of €78,000 in respect of land bought for €1.3m (6pc rate) on a transfer executed on March 1, 2018.

Full relief was available as the €70,000 ceiling is applied only in respect of transfers executed on or after January 1, 2019.

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However, she is not entitled to any further Agriculture Block Exemption Regulation (ABER) relief as such relief claimed between July 1, 2014 and December 31, 2018 must be taken into account in establishing entitlement to further relief after that date and the €70,000 ceiling has already been exceeded.

The ABER allows the granting of certain categories of State aid to the agricultural and forestry sectors and in rural areas without prior notification to the EU Commission.

If, instead of €78,000, she had claimed young trained farmer relief of €30,000 between July 1, 2014 and December 31, 2018 she would be entitled to claim a further €40,000 in ABER relief on or after 1 January 2019.

Single transferee with no prior claims and consanguinity relief

A young trained farmer receives a gift of the family farm worth €1.3m from his parents. The deed of transfer is executed on January 5, 2019.

The stamp duty liability would be €78,000 (6pc rate) in the absence of any reliefs.

Because consanguinity relief is claimed the stamp duty payable is reduced to €13,000 (1pc rate).

However, as young trained farmer relief also applies no stamp duty is actually payable and €13,000 is the amount of State aid granted and not €78,000.

The amount of State aid still available to this young trained farmer following the transfer is €57,000 (€70,000 less €13,000).

Single transferee with no prior claims and ceiling exceeded

A young trained farmer buys a farm for €3 million. The deed of transfer is executed January 5, 2019. In the absence of any relief the amount of stamp duty due at 6pc is €180,000.

The transferee claims young trained farmer relief. The maximum amount of relief that can be claimed is €70,000 as no ABER relief has been claimed since 1 July 2014.

The balance of the stamp duty liability of €110,000 must be paid. No further ABER relief may be claimed.

ROS is currently being adapted to cater for a situation where full young trained farmer relief may no longer be available where the €70,000 State aid ceiling has been exceeded.

The adaptation is expected to be completed by the end of June 2019. In the meantime, persons filing a stamp duty return where the transferee is not entitled to claim full relief should send a cheque to the National Stamp Duty Office or make an EFT payment for the amount of stamp duty due.

Pending the development referred to above, the young trained farmer may file the stamp duty return and claim full relief on the return but should pay €110,000 directly to the National Stamp Duty Office.

Single transferee with no prior claims receiving a one-third interest in farmland

A young trained farmer receives a one-third interest in the family farm from both her parents transferring to her and themselves.

The deed of transfer is executed on February 2, 2019.

She claims both consanguinity relief and young trained farmer relief on her one-third interest.

Consanguinity relief reduces the amount of stamp duty due to €20,000. Young trained farmer relief further reduces the amount due to nil.

The young trained farmer had not previously claimed any of the ABER reliefs that are aggregated for the €70,000 ceiling.

The relief is not apportioned between the young trained farmer and her parents. In this example the young trained farmer has used up €20,000 of her allowable €70,000 State aid amount.

More than one transferee

Two young trained farmers A and B buy a farm as tenants-in-common; A has a 60pc interest and B a 40pc interest. The deed of transfer is executed on March 4, 2019.

The amount of stamp duty due is €60,000. They both qualify for young trained farmer relief and no stamp duty is payable. The amount of State aid is €60,000, with €36,000 apportioned to A and €24,000 to B.

This means that, for the purposes of the €70,000 ceiling on State aid, A can claim a further €34,000 ABER relief and B can claim a further €46,000 ABER relief.

If the farm had been purchased by A and B as joint tenants instead of as tenants-in common, each of them would have used up €30,000 of their allowable €70,000 State aid amount.

If a third joint tenant had been involved in the purchase, each of them would have used up €20,000 of their allowable €70,000 State aid amount.

Two transferees, one with prior claim who exceeds ceiling

A young trained farmer X purchases farmland in her sole name. The deed of transfer is executed on 2 January 2019. She claims young trained farmer relief of €50,000. As the amount of State aid granted is €50,000, she can claim further ABER relief up to €20,000. Three months later she and her partner Y, who is also a young trained farmer, purchase 80 hectares of farmland as joint tenants and the stamp duty is €90,000.

As this is Y's first claim for an ABER relief, he can claim his full €45,000 young trained farmer relief.

However, as X has already used up €50,000 of her €70,000 allowable State aid amount, she can claim only a further €20,000 in young trained farmer relief. The net result is that €25,000 stamp duty is payable on the deed of transfer (i.e. €90,000 less X's €20,000 relief and Y's €45,000 relief).

Purchase with non-farmer spouse not subject to €70,000 ceiling

A young trained farmer and his wife (who is not a farmer) buy a farm as joint owners for €800,000 and get young trained farmer relief of €48,000 (€800,000 at 6pc).

The amount of young trained farmer relief is split between them. The husband is therefore granted €24,000 in State aid which means that young trained farmer relief of up to €46,000 can be claimed on any further acquisitions of land by him without exceeding the €70,000 ceiling (assuming no income tax relief claimed). His wife is not subject to the €70,000 ceiling.

Acquisition by two young trained farmers with one exceeding €70,000 ceiling

Two young trained farmer brothers A and B are jointly gifted the family farm valued at €3m incurring a stamp duty liability of €30,000 having claimed consanguinity relief. The amount of young trained farmer relief claimed is €30,000 (€15,000 each). Brother A subsequently purchased land for €1.2m from an uncle.

He claimed consanguinity relief which reduced his stamp duty liability to €12,000 (€1.2m @ 1pc). He also claimed young trained farmer relief which further reduced his stamp duty liability to nil. This brings his aggregate State aid to €27,000 (€15,000 + €12,000) which is below the €70,000 ceiling. B subsequently purchased land for €1.2m from an unrelated party.

As consanguinity relief did not apply, his stamp duty liability is €72,000 (6pc rate). Having already claimed €15,000 young trained farmer relief, he can claim up to €55,000 more in this relief leaving him with a stamp duty liability of €17,000 and unable to claim any further ABER relief.

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