Farm Ireland

Sunday 25 February 2018

CGT is the main issue from Budget

Theresa A Murphy

We all know one or two farmers 'married to the land', but given the findings of the recent study on 'Land Mobility and Succession in Ireland' commissioned by Macra na Feirme, it appears that 40pc believe it is important the land remains farmed by the family.

If this is a true reflection of the wishes of Irish farmers, then Budget 2014 had a thing or two of interest to say.

For the past fortnight the nation has been focused on the Budget, however for those farmers who wish to transfer or inherit the family farm, the nasty hangover of Budget 2013 is really only about to kick in now.

From January 1, 2014 an upper limit of €3m will be imposed on the value of the assets eligible for relief from Capital Gains Tax (CGT), where the transfer is to a child and where the transferring individual is aged over 66 years.

This measure was introduced to encourage the earlier transfer of farms. For farmers between 55 and 66, even after January 1, 2014, there will be no such upper limit.

The urgency applies where the farmer has turned 66 or will turn 66 before December 31 this year.

As the 33pc CGT rate has remained the same in Budget 2014, the window for the transfer of these farms with no upper limit being imposed on the CGT relief, will be a valuable point of interest for farmers.


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However, it does require that farmers act quickly if they want to benefit from this measure.

While the reality of this relief affects the ageing farmer, land acquisition and mobility is a matter central to the focus of many young farmers entering the business but constrained by land availability, and those farmers looking to expand their farming operations.

Budget 2013 was good to those wishing to buy land, which would be kept for at least seven years, as it introduced CGT relief on properties bought between December 6, 2011 and December 7, 2013.

This really means that CGT would not be payable on the capital gain made over a seven-year period.

Budget 2014 has extended the period in which these land purchases can be made up to December 31, 2014.

This could prove a very valuable relief for farmers wishing to expand or purchase land over the next few years.

Budget 2014 further impacted the family farm through the consanguinity (blood relative) relief for Stamp Duty on non-residential properties (agricultural land falls into this category).

This reduces the rate of Stamp Duty from 2pc to 1pc on transfer of land between close relatives. Consanguinity in this context includes parents, grandparents, step-parents, a husband or wife, brother or sister, uncles or aunts.

It also includes lineal descendants of a parent, husband or wife or brother or sister and foster children.

The urgency in this context is that this relief will only apply until the end of 2014 and will be abolished completely as of January 1, 2015.

For those who intend to transfer the family farm through their will, that is after death, inheritance tax or Capital Acquisitions Tax (CAT), appears to have remained the same as of the new Budget.

It certainly would appear that while the Government has given some consideration to the stark reality that Ireland's farming population is an ageing one, it has only given farmers a very brief window of opportunity in which to act if they wish to minimise their tax liability resulting from the transfer of the family farm.

It is also worth remembering that the Budget 2014 may be subject to change until finalised in the Finance Bill 2014.

Theresa A Murphy is a barrister based in Ardrahan, Co Galway

Irish Independent